Dollar Bulls Regain Control: USD/JPY Surges Past 162 as Markets Eye Fed Minutes

The US dollar is back in the driver’s seat this week, shaking off last Thursday’s disappointing Non-Farm Payrolls report to push higher across the board. The standout mover is USD/JPY, which has surged back above the 162.00 handle as traders reassess the Federal Reserve’s rate path and Japan’s reluctance to intervene in currency markets.

Dollar Regains Momentum After Brief NFP Dip

Last week’s US jobs report missed expectations, triggering a sharp but short-lived dollar selloff. The greenback has since recovered all those losses and more, with the Dollar Index (DXY) climbing back toward 13-month highs. The key takeaway from the NFP data is that while it dampens expectations for multiple Fed rate hikes this year, it is nowhere near weak enough to justify aggressive pricing of rate cuts.

Markets have trimmed hawkish expectations, but the underlying narrative remains intact: the US economy is still outperforming its peers, and the Fed under Chair Kevin Warsh maintains a data-dependent but broadly hawkish stance. With oil prices surging in recent sessions, the inflation outlook has become more complicated, potentially keeping the Fed on a tightening bias for longer.

USD/JPY: Back Above 162 as Japan Holds Fire

The yen continues to be the weakest link among major currencies. USD/JPY has climbed back above 162.00 after briefly dipping below 160.50 on Friday amid speculation that Japanese authorities would use the holiday-thinned session to intervene. That intervention never materialized, and traders have quickly rebuilt long dollar positions.

Japan’s Ministry of Finance has issued verbal warnings, but history shows that intervention alone rarely delivers lasting yen strength. Without a convincing shift in the Bank of Japan’s policy stance — specifically, aggressive rate hikes and stronger forward guidance — any intervention-driven yen gains are likely to prove temporary. The macro backdrop continues to favor further USD/JPY upside, with technical resistance now at 163.00 and 164.00.

Key Events This Week: ISM Services and FOMC Minutes

Traders are now focused on two major events. The ISM Services PMI (expected 54.2 vs. 54.5 prior) will provide a crucial update on the health of the US economy. A print significantly above or below expectations could shift rate expectations. Later in the week, the June FOMC meeting minutes will offer insight into whether Warsh’s hawkish tone reflects a broad committee consensus or if there are emerging concerns about economic momentum.

Unless the minutes reveal a more dovish tilt than markets currently anticipate, interest rate differentials should continue to support the dollar against the yen and other low-yielding currencies.

Oil Surge Clouds the Outlook

Rising oil prices have emerged as a new wildcard. Crude’s recent surge threatens to keep inflation elevated, complicating the Fed’s path and potentially delaying any pivot toward rate cuts. This dynamic has already impacted GBP/USD, where the dollar has regained the upper hand, and is weighing on risk-sensitive currencies across the board.

What Traders Should Watch

• USD/JPY support at 161.50-161.95 — a break below this zone would signal a bearish shift
• ISM Services PMI — a deviation from the 54.2 consensus could trigger sharp dollar moves
• FOMC minutes — any dovish dissent within the committee would be dollar-negative
• Oil price action — continued crude strength keeps inflation fears alive and supports the dollar

For traders looking to position themselves, the path of least resistance in USD/JPY remains to the upside as long as the 161.50 support holds. However, with the pair at multi-decade highs, risk management is essential — intervention risk, while diminished, has not disappeared entirely.

Stay updated with the latest market analysis and broker reviews to find the best trading conditions for your forex strategy. For a deeper dive into currency pair analysis, check our IC Markets review for competitive spreads on major pairs.