The Japanese Yen (JPY) has been ticking lower against the US Dollar (USD) on Thursday, retracing gains after a significant US-Japan coordinated intervention that led to a 4.5% appreciation late last week. The USD/JPY pair has returned to levels just below 158.00 after reaching lows at 155.23 on Monday, despite ongoing US Dollar weakness [1]. UOB analysts report that USD/JPY traded quietly between 157.27 and 157.87, closing at 157.74, with momentum indicators remaining flat. They expect the pair to stay within a 157.30–158.20 range in the near term [2].
Following the intervention, the Japanese cabinet approved a plan to cut the sales tax on food for two years and is planning handouts to lower-income households to address high living costs impacting PM Takaichi’s popularity. However, Rabobank notes that the unfunded tax plan has drawn criticism from both opposition and ruling LDP members, as well as market participants. Despite these concerns, a 30-year bond auction showed little sign of investor fatigue, with Rabobank suggesting that the Yen’s performance will be the real test of policy credibility [1].
Market participants are closely watching US macroeconomic data, particularly the upcoming Nonfarm Payrolls report. The consensus forecasts 80K new payrolls in July, up from June's 57K, but recent data has cast doubt on US labor market momentum. The ADP Employment Change report showed only 44K net employment growth in July, well below expectations, and the ISM Services PMI missed estimates with contracting employment. This has led traders to reduce expectations for a Federal Reserve rate hike to 54% from 67% earlier in the week, keeping US Dollar bulls subdued [1].
UOB analysts maintain a downside bias for USD/JPY as long as the strong resistance at 160.00 is not breached, with key downside levels at 155.00 and 154.10. They note that downward momentum has slowed after USD briefly fell to 155.21 but rebounded, and expect the pair to remain range-bound in the near term [2].
CONCLUSION
The Japanese Yen has lost some of its intervention-driven gains, with USD/JPY stabilizing just below 158.00 amid mixed US economic signals and Japanese policy moves. Analysts see the pair remaining range-bound, with downside risks persisting unless resistance at 160.00 is breached. Market sentiment is cautious, awaiting US payroll data and further developments in Japan’s fiscal policy.