The week the tape stopped fighting our book — mostly. USD/JPY punched to a fresh 40-year high on Friday, with the pair soaring to 163.81, marking a new 40-year high, as repeated warnings of possible currency intervention failed to halt the yen's decline amid broad dollar strength, and the market paid little attention to the Japanese Finance Minister's statement that authorities are ready to take decisive action — a straight win for our USD/JPY long but the driver dragging every yen-cross short (CAD/JPY, NZD/JPY, EUR/JPY) to fresh window highs. The ECB held on July 23, as expected: the Governing Council decided to keep the three key ECB interest rates unchanged, noting the outlook for energy prices, while highly volatile, currently stands close to the baseline of the June projections and well above levels recorded prior to the Middle East conflict — leaving the euro without an upside catalyst and keeping our EUR/USD and EUR/SGD shorts working. Meanwhile sterling's July rally has broken down ahead of the July 30 BoE: TD Securities noted the pound rally in July was overdone, and current inflation dynamics should be consistent with most MPC members remaining on hold — the fade that halved our GBP/USD short's loss. Feeding all of it, oil jumped over $100 a barrel for the first time since May this week, re-arming the inflation tail and reinforcing the petro-CAD against our CAD shorts.
How our views are tracking
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Short NZD/JPY — thesis weakened The book's worst position deepened as the relentless yen slide to fresh 40-year lows overwhelmed a still-firm kiwi, leaving both legs of the short adverse into the July 31 BoJ. |
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Short CAD/JPY — thesis weakened Oil above $100 is a double blow — yen-negative via Japan's energy-import channel and CAD-positive via the petro-loonie — pushing the double-short to a fresh window high. |
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Long SGD/CHF — thesis strengthened The trade broke cleanly through its tactical target this week as SGD firmness combined with a broadly softer franc, and the positive carry kept paying throughout. |
Invalidator watch
No level-based invalidator triggered this week, and the picture actually improved on the dollar-short legs — GBP/USD reversed direction and is now grinding toward rather than away from its 1.3000 trigger. The one to watch: our EUR/USD short sits just a hair above the level where its tactical target and strategic-long invalidator coincide, so a break there is simultaneously the win and the signal to flip — a natural review point into the FOMC.
Next week
| Wed Jul 29 | FOMC decision (Warsh) | Affects: EUR/USD, USD/JPY, GBP/USD |
| Thu Jul 30 | Bank of England + MPR | Affects: GBP/USD |
| Fri Jul 31 | BoJ decision + Outlook Report | Affects: USD/JPY, CAD/JPY, NZD/JPY, EUR/JPY, CHF/JPY |
The July 31 BoJ is the single most important event for this book — it is the fulcrum for the entire yen-cross bucket now sitting at its worst of the cycle. Consensus is a hold: the BOJ may raise its fiscal 2026 growth forecast and trim its inflation outlook on falling oil prices, but will keep its focus on inflation risks and hold rates at 1% on July 31. The risk is timing ambiguity — the absence of explicit signalling on the next hike could see yen volatility persist as investors parse the tone of the quarterly report rather than a firm date — which would leave our yen-cross shorts drifting higher. On the Fed, the base case is a fifth straight hold, though surging oil prices above $100 per barrel have boosted the probability of a rate hike later in 2026 to 38%, up from 12% a week earlier.
Full analysis with all pair rankings, carry landscape, risk dashboard, and catalyst calendar available for Edge and Dossier members.