Japanese Yen weakens despite intervention warnings as USD/JPY rebounds near 158

USD/JPY traded close to 158.00 on Tuesday, rising 0.49% for the day. After a sharp yen rebound last week, driven by coordinated intervention from Japanese and US authorities, investors are shifting focus back to fundamentals, allowing the US Dollar to recover some losses. Japan's Ministry of Finance confirmed the coordination between Tokyo and Washington in the intervention, with Finance Minister Satsuki Katayama stating authorities would not hesitate to intervene again if needed.

US Treasury Secretary Scott Bessent affirmed Washington's readiness to cooperate in future interventions. Japan reportedly spent around $34 billion on last week's intervention. However, market focus now shifts to Japan's fiscal outlook, with the Liberal Democratic Party proposing a temporary reduction in food consumption tax and cash transfers for low- and middle-income households.

The lack of a clear funding mechanism has raised investor concerns, putting pressure on the yen. The Bank of Japan raised its policy rate to 1% in June, but borrowing costs remain low compared to other major economies, supporting carry trades and aiding USD/JPY. Investors also watch Middle East geopolitical developments, as tensions between the US and Iran appear to ease temporarily.

The Job Openings and Labor Turnover Survey (JOLTS) and Nonfarm Payrolls (NFP) report are due later on Tuesday, with economists expecting 83K new jobs in July and the unemployment rate to rise to 4.3% from 4.2%. MUFG expects US intervention to support the yen to remain relatively minor, believing joint intervention can only provide temporary support.

TD Securities anticipates momentum could briefly push USDJPY lower to 153, but they do not expect it to sustainably trade below that level without BoJ and US Treasury commitment. The pair currently trades at 157.88, holding below key moving averages and showing moderately positive short-term momentum. USD/JPY faces resistance near the 38.2% retracement at 158.58 and the 50.0% level at 159.61, with a dense supply zone defined by the 61.8% retracement at 160.64 and the 200-period SMA at 161.78.

On the downside, support is around the trend-line break area at 157.72, with the 23.6% retracement at 157.30 offering the next significant floor.