USD/JPY Defies Soft Data with Resilient Price Action

The USD/JPY pair showed resilience last week despite soft US data and falling Fed rate hike bets. The pair barely responded to weaker-than-expected US inflation reports, a decline in US jobless claims, and lower market pricing for future Fed rate hikes.

US-Japan yield spreads continued to compress, with the Bank of Japan possibly lifting rates sooner than markets expect. Despite this, yen shorts declined, suggesting speculators are not rushing to rebuild positions despite the pair's rebound from a low struck earlier in August.

The calendar is thin for the week ahead, with only a few releases potentially influencing USD/JPY. These include Japan's preliminary Q2 GDP report and US flash PMIs, which may show signs of weakening momentum.