Forex week in review 31/2026: intervention knocks USD/JPY off its 40-year high as the Fed splits

Last week we wrote about USD/JPY sitting just under 164.00, a 40-year high, with Japan’s finance minister warning that Tokyo stood ready to act. This week it acted, and so, unusually, did Washington. USD/JPY fell 3.84% from Monday’s open to Friday’s close, the dollar index dropped back below 100, and EUR/USD finally broke out of the narrow range it had been stuck in for a month. Along the way the Federal Reserve held rates with three dissents in favour of a hike, the Bank of England held with three dissents of its own, and the Bank of Japan stayed on hold too.

If you want to understand how central banks and finance ministries influence currencies, this was about as complete a lesson as a single week can give.

The week at a glance

• USD/JPY fell 3.84% to 157.40. Thursday’s drop from 163.30 to 158.00 was the largest single move.
• EUR/USD rose 1.18% to 1.1527, its highest close in this run of recaps.
• GBP/USD gained 1.07% to 1.3487.
• NZD/USD rose 1.40% and USD/CHF fell 1.15%.
• The dollar index (DXY) fell from about 101.47 to 99.80, according to Yahoo Finance data.
• Brent crude finished near $90, down from about $97 the previous Friday, after a volatile week.
• US stocks recovered late in the week. The S&P 500 closed Friday at 7,489.81.

As in previous recaps, weekly opens and closes are taken from Yahoo Finance hourly data. Your broker’s prices may differ by a few pips.

Day by day

Monday 27 July: oil slides, the franc hits a low

The week began with a sharp fall in oil. WTI crude dropped more than $7 during the session and settled at $82.61, after the US and Iran paused direct military strikes and President Trump said talks were under way. Lower oil normally eases inflation fears, but the dollar did not weaken much. investingLive’s wrap noted that traders had “been down this road before” with talks that stalled.

The standout FX move was in the Swiss franc. USD/CHF hit a year-to-date high of 0.8193 after reports that the Swiss National Bank was expected to keep its policy rate at 0% through the end of 2027. A central bank that signals it will keep rates at zero for longer makes its currency less attractive to hold, which is why the franc was the weakest major on the day.

US durable goods orders rose 0.3% in June, well short of the 2.5% expected. GBP/USD slipped to 1.3285, just below the previous week’s low. Markets priced about a 37% chance of a Fed hike that Wednesday and about 55% for September, according to investingLive.

Tuesday 28 July: waiting for the Fed

Tuesday was a holding pattern ahead of the Fed. Oil kept falling on hopes for US–Iran diplomacy, including an Omani proposal on the Strait of Hormuz, and Brent futures closed near $84 according to Yahoo Finance data. USD/JPY traded in a tight 163.67–163.95 range, and the dollar index edged up to 101.64, just above its 1 July peak, according to Newsquawk. GBP/USD dipped to 1.3273.

Newsquawk described markets as treating the FOMC as potentially “live”, with roughly a 30% probability of a 25 basis point hike priced. A live meeting means a real chance of a move rather than a foregone conclusion. Before such meetings many traders cut positions, which is one reason the pre-meeting session is often quiet even when the outcome is uncertain.

Wednesday 29 July: the Fed holds, but three officials want a hike

The Federal Open Market Committee kept the federal funds target range at 3.50–3.75%. The vote was 9–3. Beth Hammack, Neel Kashkari and Lorie Logan all dissented in favour of a 25 basis point increase. Three dissents is a lot for the Fed and signals a committee genuinely divided over how to handle an energy-driven rise in inflation.

The statement said inflation “remains elevated relative to the Committee’s 2 percent goal”, partly reflecting supply shocks in energy, and cited “elevated uncertainty that owes, in part, to the conflict in the Middle East”. On the labour market, it said job gains had kept pace with the workforce and the unemployment rate had changed little.

Chair Kevin Warsh gave little forward guidance. investingLive summarised his message as the economy, inflation and the bond market determining the path of rates, a deliberate move away from the Fed telling markets in advance where it intends to go.

The market reaction was not what many expected from a hawkish split. Long-dated Treasury yields jumped (the 30-year rose almost 12 basis points to about 5.21%), stocks fell (S&P 500 down 1.51%), and the dollar weakened against most majors, with EUR/USD up 0.70% on the day. Oil also bounced 6.9% to $84.63 on renewed geopolitical concerns. When long-term yields rise because investors demand more compensation for holding US debt, rather than because growth is strong, the dollar does not necessarily benefit. That distinction is subtle but it mattered all week.

Thursday 30 July: the BoE holds, GDP misses, and USD/JPY drops 500 pips

Thursday packed in several major events.

The Bank of England kept Bank Rate at 3.75% by a 6–3 vote. Megan Greene, Catherine Mann and Huw Pill voted for an increase to 4%. The MPC said CPI inflation had fallen to 2.6% but was expected to rise later in the year as higher energy costs pass through, and that risks to inflation were tilted upward. It said it had seen little evidence of second-round effects so far.

Euro-area GDP grew 0.4% in the second quarter, double the 0.2% expected, according to the preliminary estimate reported by investingLive. Firmer growth gives the ECB more room to tighten again if inflation requires it.

In the US, advance Q2 GDP grew at a 1.5% annualised pace against 2.1% expected, though consumer spending rose 3.2%. June PCE inflation slowed to 3.7% year on year from 4.1%, and core PCE to 3.3% from 3.4%, both exactly as forecast. Initial jobless claims were 197,000 against 200,000 expected.

Then came the move of the week. In the European morning USD/JPY dropped suddenly from 163.30 to 162.28 before recovering. In the US session it collapsed from 163.30 to a low of 158.00, just short of its 200-day moving average at 157.89, before bouncing to 159.88. investingLive described the move as driven by speculation of intervention. A Reuters column by Jamie McGeever later cited estimates that Japan may have sold nearly $60 billion of dollars for yen that day; Japan’s finance ministry publishes official intervention totals only with a lag, so treat any same-week figure as an estimate.

The broader dollar fell with USD/JPY. NZD, AUD and CHF all gained around 1% or more against the dollar on the day. US stocks surged, with the Nasdaq 100 up 3.36%.

Friday 31 July: the BoJ holds, Washington buys yen

The Bank of Japan kept its policy rate at 1.00%, as expected. Board member Takata dissented in favour of a 25 basis point hike, according to investingLive and other reports. Richmond Fed President Barkin described the Fed’s decision as a “close call”.

USD/JPY fell another 1.07% on Friday to around 157.80 in late trade, with reports of official rate checks and banks being told to stand ready to exchange yen for euros. Over the weekend the Trump administration acknowledged that the US Treasury had bought yen on Friday in a joint operation with Japan. According to the Reuters column, it was the first US intervention in currency markets since 2011 and the first US yen buying since 1998, and the Treasury funded its purchases with euros rather than dollars. The same column cited estimates that Japan spent over $36 billion in Friday’s joint operation.

Data were mixed. The US employment cost index rose 0.9% in Q2 against 0.8% expected, a sign wages are still firm. Final University of Michigan sentiment for July was 55.2 against 54.0 expected. Canadian GDP for May rose 0.3% against 0.2%. The US 10-year yield rose about 5 basis points to 4.71% on the day.

Pair by pair

USD/JPY: what intervention looks like

USD/JPY fell from 163.69 to 157.40, a drop of more than 600 pips in a week, with a low of 157.15 late on Friday. Intervention days have a recognisable shape: a sudden, near-vertical move far larger than anything the news flow explains, followed by a partial rebound as some traders buy the dip and others wait for the next round.

What made this episode unusual was US participation. Coordinated intervention has historically been rare, and it carries more weight than a single country acting alone because it signals the two governments agree the exchange rate has gone too far. It does not change the underlying interest rate gap, though, and that gap was still wide after the Fed and BoJ both held. That is why many analysts were cautious about reading intervention as a permanent change in direction.

EUR/USD: the range breaks

EUR/USD had spent a month in a range of roughly 120 pips. This week it broke higher, rising 1.18% to 1.1527 and touching 1.1550. Two forces did the work: a broad dollar sell-off after the Fed and during the yen intervention, and stronger euro-area growth data. Our guide to support and resistance explains why breaks of long, tight ranges can travel further than traders expect.

GBP/USD: a hawkish split, a weaker dollar

Sterling rose 1.07% to 1.3487 after touching 1.3274 on Tuesday. The BoE’s 6–3 vote was more hawkish than a unanimous hold, but most of the move came from the dollar side of the pair.

USD/CHF: from year high to weekly loss

USD/CHF hit 0.8193 on Monday on the SNB report, then fell to 0.8074 by Friday. The reversal shows how quickly a currency-specific story can be overwhelmed by a broad dollar move.

NZD/USD and AUD/USD

The New Zealand dollar was the best performer, up 1.40% to 0.5877, and the Aussie gained 0.44%. Higher-yielding, risk-sensitive currencies did well once the dollar turned and US stocks rebounded.

Gold: going nowhere fast

COMEX gold futures rose only 0.38% on the week to $4,107. Investors had to weigh a weaker dollar, which helps gold, against higher long-term yields, which hurt it.

How currency intervention works

When a government intervenes to support its currency, it sells foreign currency reserves (usually dollars) and buys its own currency. Japan holds over a trillion dollars in reserves, so it can sell a lot of dollars. But reserves are finite, and markets know it. That is why intervention tends to work best when it coincides with a change in fundamentals, such as a central bank becoming more hawkish or the other country’s yields falling.

The US operation was unusual in another way: according to the Reuters column, the Treasury funded its yen purchases with euros rather than dollars, swapping one foreign reserve asset for another. The column noted analysts saw the US amount as small next to Japan’s spending. The signal mattered more than the size.

For retail traders the lesson is about risk, not direction. Intervention moves are fast and leave large gaps. Stop orders can fill well away from their levels in those conditions, which is called slippage; our slippage guide explains how it happens. Spreads also widen dramatically, as covered in our guide to spreads and commissions.

Here is an illustrative example. A trader holds 2 standard lots long USD/JPY at 163.30 with a stop at 162.30, intending to risk 100 pips. Each pip on 2 lots is worth 2,000 yen, so the planned risk is 200,000 yen (about $1,225 at 163). If the market gaps through the stop and the order fills at 160.30, the loss is 300 pips, or 600,000 yen (about $3,675), three times the plan. With high leverage on a small account, that can trigger a margin call or stop-out; see our guide to margin calls and stop-outs.

Why a hawkish Fed split did not lift the dollar

A natural question from this week: if three Fed officials wanted to raise rates, why did the dollar fall after the meeting?

There are a few reasons. First, the decision itself was a hold, and the market had priced a significant chance of a hike (around 37% on Monday). Removing that possibility is dovish relative to expectations. Second, the chair offered no guidance, so the market could not price a September move with confidence. Third, the rise in long-dated yields looked more like a demand for extra compensation to hold long-term US debt than a vote of confidence in US growth. Rising term premiums can coexist with a weaker currency.

The broader principle is covered in our guide to central banks and interest rates: currencies react to changes in expected policy relative to what was priced, not to the decision in isolation.

What this week teaches

• Intervention changes the risk profile of a trade. USD/JPY at a 40-year high came with a clear official warning. Holding a large, highly leveraged position into that warning meant accepting the risk of a sudden 500-pip move.
• Coordinated action is rarer and stronger than solo action. The US joining Japan was a significant signal, even if the amount was small.
• The reaction to a decision depends on expectations. A hawkish split still read as a dovish outcome against what was priced.
• Range breaks can be quick. EUR/USD went from the narrowest monthly range in decades to a 1%-plus weekly gain.
• Size positions for the worst case. With leverage up to 30:1 on majors for EU retail clients, and the majority of retail CFD accounts losing money according to broker disclosures, the maths of a gap matters more than the forecast. Our position sizing guide shows how to work it out.

Scheduled next week (3–7 August)

Events on the calendar, listed for planning only:

• Sunday 2 August: OPEC+ Joint Ministerial Monitoring Committee meeting.
• Monday 3 August: Canadian Civic Holiday (thinner CAD liquidity); final manufacturing PMIs; Swiss CPI (July); US ISM manufacturing (July).
• Tuesday 4 August: US JOLTS job openings (June); US and Canadian trade balance (June); New Zealand Q2 jobs report.
• Wednesday 5 August: final services PMIs; US ADP employment (July); US ISM services (July); US Treasury quarterly refunding announcement.
• Thursday 6 August: US weekly jobless claims; Banxico decision.
• Friday 7 August: US jobs report (July); Canadian jobs report (July).

Use an economic calendar set to your own time zone, and remember that the yen remains sensitive to any official comments after this week’s operations.

For the background to this week’s yen story, see last week’s recap: forex week in review, 20–24 July 2026.

Sources

• investingLive Americas FX news wrap, 27 July 2026
• investingLive Americas FX news wrap, 29 July 2026
• investingLive Americas FX news wrap, 30 July 2026
• investingLive European markets wrap, 30 July 2026
• investingLive Americas FX news wrap, 31 July 2026
• Federal Reserve FOMC statement, 29 July 2026
• Bank of England Monetary Policy Summary, July 2026
• Reuters column via The Star: Making sense of the Trump Treasury’s odd FX intervention
• Newsquawk European market wrap, 28 July 2026
• Newsquawk weekly economic calendar, 2–7 August 2026
• Yahoo Finance USD/JPY historical data