USD/JPY Breakout Hinges on U.S. July CPI Release and Inflation Expectations

The USD/JPY pair has been consolidating within a range of 158.58 to 155.23 yen in the foreign exchange market, awaiting a potential breakout after the U.S. July Consumer Price Index (CPI) release on August 12.

Despite a weaker-than-expected U.S. July employment report, which saw nonfarm payrolls decline by 23,000 month-over-month and a drop in May and June figures, the dollar has rebounded to the upper 157-yen range due to persistent buying demand from Japanese corporate entities.

The U.S. July CPI is expected to show a year-over-year increase of 3.5%, flat from June, with a month-over-month reading of +0.2%. If inflation indicators exceed market expectations, rate hike speculation could reignite, driving up U.S. yields and the dollar.