USD/JPY: Was Intervention Enough to Change the Trend?

USD/JPY finds itself at the centre of one of the most dramatic currency stories this summer. Having weakened to a four-decade low near ¥164, the yen was pulled back sharply after Japan and the US carried out a coordinated intervention, with Tokyo reportedly spending around $34 billion in a single session to defend its currency. The move briefly pushed the pair toward ¥155, though the yen has since given back some of those gains, trading back near ¥158 as doubts persist over how long intervention alone can hold.

The underlying driver remains the wide gap between US and Japanese interest rates, made worse by rebounding oil prices following renewed tensions in the Strait of Hormuz. Markets are now watching for a possible BoJ hike in September, encouraged by six straight months of rising real wages, while the Fed's own July dissents—three policymakers pushed for a hike over a hold—keep US rates firmly in the driver's seat too.

With both central banks now genuinely in play, USD/JPY's next move looks set to hinge on which side moves first: Tokyo's rate decision, or Washington's next data-driven signal.

Technical Analysis of USD/JPY

As the USD/JPY chart shows, the pair collapsed sharply after the coordinated intervention, dropping from the 163.76 highs to a low near 155.21 before staging a steady recovery. Price is now testing the 0.382 Fibonacci retracement near 158.48, supported by an ascending trendline off the intervention low, with the RSI showing a bullish divergence as it prints higher lows even as price briefly retested the range.

Bullish Scenario

Should buyers hold the ascending trendline and break decisively above the 0.382 retracement, the path would open toward the 0.5 level near 159.49, with a stronger move targeting the 0.618 retracement around 160.50, where deeper resistance likely awaits.

Bearish Scenario

Conversely, a break below the ascending trendline would invalidate the current recovery structure, exposing a retest of the intervention low near 155.21-156.00, with the RSI divergence losing credibility if price fails to hold this zone.

With price coiled right at the 0.382 confluence, and both the trendline and RSI hinting at renewed strength, USD/JPY looks set for a decisive move—will the recovery from intervention extend, or will Tokyo's defence prove only temporary?

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