Key Events Today:

14.08 12:30 UTC: USD — Retail Sales Data.

The Yen is back in the spotlight after USDJPY returned to the area around 159.4. The market estimates the probability of a Bank of Japan rate hike in September at approximately 76%, significantly higher than late July levels. Additional support for the Yen comes from the risk of new official action: following the recent joint intervention, Japanese officials remain ready to respond to excessive currency weakness.

On the Dollar side, pressure increased after soft US inflation data. July producer prices showed zero growth, while the probability of a Fed rate hike in September fell to around 35%. This reduces support for USDJPY from US rate expectations and makes the Dollar’s previous advantage less sustainable, especially against the backdrop of expected further tightening by the Bank of Japan.

The upside risk for the pair stems from today’s US retail sales data and potential market disappointment if the Bank of Japan fails to signal a faster pace of rate hikes. However, for the current session, the combination of a weaker Dollar momentum, high probability of a September BoJ move, and official sensitivity to a weak Yen outweighs these factors. The base scenario favors a decline in USDJPY.

Recommendations: SELL 159.35, SL 159.75, TP 158.45.