Yen Reversal Reshapes All Major Crosses

Yen Reversal Reshapes All Major Crosses

The Japanese currency gains up to 4% after BoJ and Fed decisions and market intervention. Technical analysis of the main JPY pairs

During the latest full trading week, from 27 to 31 July 2026, the Japanese yen appreciated broadly against all major international currencies.

The move affected USD/JPY, EUR/JPY, GBP/JPY, CHF/JPY, AUD/JPY, NZD/JPY and CAD/JPY. The main catalyst was not an immediate interest-rate increase by the Bank of Japan, but a combination of three factors: a more restrictive BoJ stance, unchanged rates at the other major central banks and foreign-exchange market intervention in support of the yen.

The changes shown below are calculated approximately between opening prices on 27 July and closing prices on 31 July. Levels may vary slightly between providers because of different reporting times.

The Yen’s Week at a Glance

The decline in these currency pairs indicates a strengthening yen, as fewer yen are required to purchase one unit of the base currency. Historical data show a particularly sharp correction between 30 and 31 July, with several pairs recording daily declines of more than 1%.

BoJ Holds at 1% but Grows More Concerned About Inflation

The Bank of Japan kept its benchmark interest rate unchanged at 1%, following the increase approved in June. The decision was passed by eight votes to one, with board member Hajime Takata preferring an immediate increase to 1.25%.

Considered in isolation, keeping rates unchanged could have weakened the yen. The market, however, attached greater importance to the change in the BoJ’s inflation assessment. The central bank acknowledged the risk that underlying price pressures could exceed 2%, also citing the effects of a weak exchange rate and demand linked to artificial intelligence.

Governor Kazuo Ueda also left the door open to further rate increases. The implicit message is that delaying policy normalisation for too long could eventually force the central bank to act more aggressively.

Intervention Changes the Market Structure

The most violent move did not come directly from the interest-rate decision. Estimates derived from BoJ liquidity flows pointed to possible intervention worth approximately ¥8.2 trillion, equivalent to nearly $59 billion.

Japan’s foreign-exchange policy is formally determined by the Ministry of Finance, while the Bank of Japan acts as its operational agent. This distinction is important: this was not a conventional monetary-policy measure, but direct action in the currency market.

Reports of US involvement or coordination increased the effectiveness of the signal. US-backed intervention carries far greater significance than a purely Japanese operation because it reduces the likelihood that the market will quickly rebuild speculative positions against the yen.

The sudden fall in USD/JPY from above 163 towards 157 triggered forced carry-trade unwinding and profit-taking in AUD/JPY, CAD/JPY, GBP/JPY and NZD/JPY.

USD/JPY: Fed Holds as Rate Gap Loses Influence

The Federal Reserve maintained the federal funds rate within its 3.50%-3.75% target range. The decision was approved by nine votes to three, a degree of dissent that points to a more intense debate over the future direction of interest rates.

The interest-rate differential between the United States and Japan remains wide at approximately 250-275 basis points. During the week under review, however, this yield advantage was not sufficient to support USD/JPY.

From a technical perspective, the break below the 160 area altered the pair’s short-term structure. The weekly low around 157-158 now represents the first support zone. A confirmed break below this level could open the way towards 155. The most significant resistance levels are located at 160 and in the 163.50-164 area.

The short-term outlook remains bearish, although the persistent interest-rate differential makes technical rebounds likely.

EUR/JPY: ECB Holds After June Rate Increase

The European Central Bank kept its three key interest rates unchanged on 23 July, after raising them by 25 basis points in June. The ECB confirmed its data-dependent approach and highlighted the uncertainty generated by energy prices and the conflict in the Middle East.

EUR/JPY initially demonstrated greater resilience, supported by the ECB’s previous tightening. The strengthening yen, however, caused a rapid reversal from the 187 area towards 181-182.

Technically, the loss of 185 followed by 183 signals deteriorating momentum. The 180-181 area represents the main support zone; below that threshold, the risk of a correction towards 178 would increase. Initial resistance is located at 183.50 and 186-187.

GBP/JPY: BoE Supports Sterling, but Not Enough

The Bank of England kept the Bank Rate unchanged at 3.75%, although three members of the Monetary Policy Committee voted for an increase to 4%. The six-to-three vote therefore delivered a relatively restrictive signal.

Despite the BoE’s more hawkish tone, GBP/JPY fell from approximately 218 towards 212. This price action shows that yen repositioning and the unwinding of carry trades outweighed sterling’s higher yield.

Immediate support is located in the 212-210 area, where a strong intraday reaction has already occurred. A break below 210 would expose the 207-208 region. To reduce bearish pressure, the pair would need to regain and hold above 215, followed by 218.50.

CHF/JPY: A Contest Between Two Safe-Haven Currencies

The Swiss National Bank has maintained its policy rate at 0%. The central bank has also reiterated its willingness to intervene against an excessive appreciation of the franc, which it considers potentially harmful to price stability.

CHF/JPY represents a comparison between two currencies traditionally regarded as defensive assets. During the week, however, the yen benefited from a much stronger currency-specific catalyst: direct intervention and expectations of further BoJ rate increases.

The decline from approximately 200 towards 195 produced a significant technical breakdown. The first support zone lies between 194 and 195, followed by the 191-192 area. A return above 198 would ease the bearish signal, while 200 remains the main psychological resistance level.

AUD/JPY: Hawkish RBA Fails to Halt Deleveraging

The Reserve Bank of Australia has maintained its cash rate at 4.35%, following the 25-basis-point increase approved in May. This is the highest rate among the central banks considered, making AUD/JPY one of the main instruments used in carry-trade strategies.

This feature amplified the weekly correction. When yen volatility increases, investors tend to close positions financed in the Japanese currency by selling higher-yielding currencies.

AUD/JPY lost more than 3%, falling from 114.48 to 110.67. The breaks below 113.50 and 112 accelerated the move. Support is now located between 109 and 110, followed by 107.50-108. To rebuild a positive technical structure, the pair would need to recover at least the 112.50-113 area.

NZD/JPY: RBNZ Rate Increase Only Limits Losses

The Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.50%. The central bank also indicated that further increases could be necessary, although their timing remains uncertain.

This stance helped NZD/JPY limit its losses relative to AUD/JPY and USD/JPY, but it did not prevent the pair from falling below 93.

The main technical support zone lies between 91.50 and 92.50. A break below this range would increase the risk of a return towards 90. Resistance is located at 94 and 95.30. As long as the pair remains below these thresholds, short-term momentum will remain negative.

CAD/JPY: Bank of Canada Holds as Oil Retreats

The Bank of Canada maintained its overnight rate at 2.25%, noting that the Canadian economy remains weak but is showing signs of improvement, while inflation is expected to converge towards 2%.

CAD/JPY was affected both by the yen’s strength and by declining oil prices. The Canadian dollar is sensitive to the energy outlook, while lower crude prices limited the support provided by the interest-rate differential.

The pair retreated from approximately 116 to 112.40. The 112-111 area represents the first support zone; below this level, the market could target 109.50-110. Resistance levels can be identified at 114 and 116.

Carry Trades Retreat, but Yen Advantage Needs Confirmation

The performance of the main JPY crosses shows that, during the week, the market assigned greater importance to the risk of intervention and possible BoJ policy normalisation than to absolute interest-rate differentials.

Nevertheless, the Japanese currency continues to offer a lower yield than the US dollar, pound sterling and the Australian, New Zealand and Canadian dollars. Without further BoJ rate increases or additional intervention, this factor could support a gradual rebuilding of carry-trade positions.

The weekly technical picture remains favourable to the yen as long as USD/JPY stays below 160-161 and the other crosses fail to recover their broken resistance levels. However, the speed of the decline increases the likelihood of rebounds and consolidation phases.

During the coming sessions, investors should focus particularly on:

• Any new intervention by Japan’s Ministry of Finance;

• Statements from Governor Ueda regarding the timing of the next rate increase;

• Expectations for Federal Reserve interest rates;

• Developments in global bond yields;

• Oil prices and geopolitical developments in the Middle East;

• Volatility and the rebuilding of carry-trade positions.

Disclaimer: This article is provided for informational purposes only and does not constitute financial advice or an invitation to invest. Foreign-exchange trading involves significant risks and may result in substantial losses.