U.S. CPI Fails to Break USD/JPY… The Battle Around 160.00 and BOJ Rate-Hike Expectations Become the Next Focus
Trading Results, 10–14 August
Weekly Total: -132,554 USD
■ Weekly Summary
This week was about determining whether the dollar weakness following the U.S. employment report would continue, or whether USD/JPY would return toward 160.00.
As a result, USD/JPY rebounded from the 157 range to the mid-159 range.
U.S. CPI and PPI showed moderating inflation, and expectations for a September FOMC rate hike declined. Even so, USD/JPY’s downside remained supported.
The main factors behind this are:
● The U.S.-Japan interest-rate gap
● Demand for yen carry trades
● Concerns over worsening Japanese fiscal conditions
● Higher oil prices driven by Middle East tensions
● Safe-haven demand for the dollar during geopolitical stress
At the same time, expectations for a September BOJ rate hike are gradually increasing, while concerns over renewed coordinated U.S.-Japan intervention are returning around 160.00.
In other words, USD/JPY has entered a very difficult phase:
“It is difficult to chase the upside, but it is also difficult to sell the downside.”
This week’s trading result was -132,554 USD.
Recent weekly performance has become more volatile. Going forward, position sizes will be reduced, with a focus only on setups where a clear trading edge is confirmed.
■ Forward Strategy
The key in the current market is not to force a prediction of USD/JPY direction.
As USD/JPY approaches 160.00, intervention concerns increase. When it declines, dip-buying is likely to emerge due to the interest-rate gap.
Therefore, the approach will be:
● Avoid chasing USD/JPY at high levels
● Do not layer yen-short positions across multiple currencies
● Do not take large positions based solely on Middle East headlines
● Confirm direction after key economic data and central-bank comments
● Focus on markets where a clear trend has emerged
FX Strategy Update
17–21 August 2026 | Market Outlook
Previous Week’s Trading Result: -132,554 USD
■ Next Week’s Market Theme
The biggest theme next week is:
“Can USD/JPY break above 160.00 again, or is a shift toward yen strength beginning?”
USD/JPY currently faces forces moving in completely opposite directions.
Dollar-strength and yen-weakness factors include:
● The U.S.-Japan interest-rate gap
● Concerns over Japan’s fiscal outlook
● Deteriorating terms of trade caused by higher oil prices
● Dollar demand during Middle East tensions
Dollar-weakness and yen-strength factors include:
● Slowing U.S. labor-market conditions
● Moderating U.S. inflation
● Fading expectations for a September U.S. rate hike
● Expectations for a September BOJ rate hike
● Concerns over coordinated U.S.-Japan intervention
Next week will be about determining which side of this tug-of-war prevails.
The main points to watch are:
● FOMC minutes
● Japanese GDP
● Japan’s nationwide CPI
● Middle East developments
● Oil prices
■ USD/JPY Strategy
The 160.00 level is the main turning point for USD/JPY.
If Middle East tensions worsen again and oil prices rise, USD/JPY could test 160.00 through a combination of:
Safe-haven dollar buying
＋
Higher Japanese import costs
＋
Yen selling
However, the closer the pair moves toward 160.00, the more strongly markets will remember the coordinated U.S.-Japan intervention at the end of July.
This is no longer a simple market where:
“The U.S.-Japan interest-rate gap is large, so USD/JPY should simply be bought.”
Conversely, if Japanese GDP and CPI are strong and expectations for a September BOJ rate hike rise, downside momentum could expand below 158.00.
Next week, the focus will not be on chasing 160.00, but on observing official reactions after rallies and the strength of dip-buying during declines.
■ FOMC Minutes
The main U.S. event next week will be the FOMC minutes.
At the previous meeting, several members supported a rate hike.
If the minutes confirm that concerns about renewed inflation were stronger than expected, September rate-hike expectations may re-emerge and support the dollar.
On the other hand, if the minutes show stronger concern about slowing labor-market conditions or downside risks to growth, rate-hike expectations are likely to decline further.
Recent U.S. economic data have generally shown fading momentum. Therefore, even if the minutes are hawkish, it will be important to assess carefully whether dollar strength can be sustained.
■ EUR/USD Strategy
EUR/USD is likely to remain without a strong directional trend.
Fading expectations for U.S. rate hikes provide support for EUR/USD.
However, the ECB is not in a position to move aggressively toward additional rate hikes, and Europe also lacks strong growth catalysts.
Therefore, even if EUR/USD rises on dollar selling, caution is needed before assuming that it will develop into a sustained euro-led uptrend.
Weak PMI data next week could renew euro selling.
■ GBP Strategy
For sterling, UK employment data, CPI, and PMI will be the main focus.
If wage growth and services inflation remain elevated, expectations for further Bank of England tightening could increase and support the pound.
However, concerns over fiscal expansion under the new government remain.
The reaction may be relatively straightforward: sterling buying if economic data are strong, and selling if economic slowdown becomes clearer.
■ AUD Strategy
For the Australian dollar, the wage price index and employment data will be important.
The RBA remains concerned about inflation, but expectations for further rate hikes are not as strong as before.
Strong wage or employment figures could support the Australian dollar.
However, if global risk aversion intensifies, the risk-sensitive Australian dollar is likely to face selling pressure.
Both economic data and the overall risk environment should be considered together.
■ CAD Strategy
For the Canadian dollar, Canadian CPI and additional U.S. tariffs will be key themes.
Domestic economic conditions remain resilient, but trade friction with the United States is a major source of uncertainty.
Higher oil prices support the Canadian dollar, but worsening tariff issues could offset that benefit.
The best opportunities may emerge when oil and trade developments point in the same direction.
■ South African Rand Strategy
For the South African rand, CPI and oil prices will be the main focus.
Higher precious-metal prices support the South African economy, but higher oil prices increase energy import costs.
Support from high interest rates remains in place. However, if global risk aversion intensifies, capital may flow out of high-yielding currencies.
Chasing prices at elevated levels should be approached cautiously.
■ Core Strategy for Next Week
The psychological turning point for the overall market next week will be:
“USD/JPY at 160.00”
The core strategy is:
● Avoid chasing USD/JPY higher toward 160.00
● Do not increase position sizes based solely on Middle East headlines
● Keep position sizes smaller around the release of the FOMC minutes
● Monitor changes in BOJ rate-hike expectations following Japanese GDP and CPI
● Avoid stacking multiple yen-related positions
● Trade only markets with clear directional momentum
■ Final Scenario
For USD/JPY next week, both of the following scenarios remain possible:
“A renewed test of 160.00 driven by Middle East risk”
and
“A pullback driven by BOJ rate-hike expectations and intervention concerns”
If Middle East tensions worsen and the FOMC minutes are hawkish, USD/JPY could test 160.00 again.
However, intervention concerns are likely to intensify sharply after a break above 160.00.
Conversely, if Japanese GDP and CPI are strong and expectations for a September BOJ rate hike rise, the unwinding of yen-short positions could accelerate.
The basic strategy for next week is:
“Do not chase 160.00. Trade only in the direction where the supporting factors clearly align.”
The battle around USD/JPY 160.00, Middle East developments, and expectations for a September BOJ rate hike.
While monitoring these three factors, the focus will remain only on the opportunities with the highest trading edge.
■ Afterword: What We Consider “Common Sense” Changes in Both Health and Markets
“Eating plenty of protein is essential for good health.”
This has become a widely accepted idea in recent years.
Particularly in strength training and dieting, high-protein diets are often recommended. Many people have come to believe that the more protein they consume, the better.
However, recent research presents a slightly different perspective.
A new review analyzing more than 350 laboratory and animal studies suggests that moderately restricting protein intake, especially certain amino acids such as methionine, isoleucine, and valine, may improve metabolism, reduce inflammation and cellular damage, and support healthier aging.
Some animal studies have even found longer lifespans.
However, the important point is not to draw the simplistic conclusion that:
“Eating less protein will help you live longer.”
There is still no direct evidence that reducing protein extends human lifespan.
In addition, the following groups may instead need adequate protein intake:
● Older adults
● Children during growth periods
● Athletes
● Pregnant people
● People recovering from illness or injury
In other words, what matters is not simply whether protein intake is high or low.
What matters is whether it is appropriate for you.
This is very similar to trading.
In markets, there are many commonly accepted rules:
“Stop losses must always be small.”
“You must always follow the trend.”
“The lower the leverage, the safer it is.”
However, one answer does not necessarily apply to every person or every market.
When new data emerge, we may need to reassess what we previously believed to be correct.
What matters is not blindly trusting conventional wisdom, but continuing to think for ourselves while incorporating new information.
In both health and investing, rather than looking for extreme answers, finding the right balance for ourselves may be what matters most.
Next week as well,
