ANZ Research discusses USD/JPY outlook for the coming week.

USD/JPY retraced sharply from its post-intervention low, reaching 159.54, around the 50% Fibonacci retracement of the 164–155 intervention move and close to 160 (100-dma). The next key retracement level is around 160.5, the 76.4% area. We do not rule out a breach of 160, largely from the USD leg of the pair, but are cautious about chasing it higher beyond this level knowing that both Japanese and US officials are on standby to defend JPY weakness.

Fundamentals have not materially changed. Wide rate differentials, Japan’s fiscal constraints and terms-of-trade pressures still argue against a durable JPY recovery. What has changed is the cost of testing official resolve. Pushing USD/JPY back toward 160 is now more expensive and reported intervention may have been absorbing a meaningful share of Japan’s readily available USD bills, even though deposits at foreign central banks and the FIMA facility remain available backstops," ANZ notes.

"Next week will bring Q2 GDP. Q1 GDP grew annualised 1.8% q/q exceeding expectations and the BoJ’s potential growth estimate of 0.7%. Continued support from government consumption and net exports will likely be a feature for Q2, although higher energy costs may see a squeeze in household budgets and consumption. National CPI figures for July are due, along with flash PMIs for August," ANZ adds.