Forex & Currency Watch — July 4, 2026

Market Snapshot

Top Movers

USD/JPY (161.38, +0.17% daily) — The pair remains elevated near 39-year highs despite soft US employment data, as the Japanese yen continues to weaken structurally and authorities remain on alert for intervention opportunities.

EUR/USD (1.1437, +0.04% daily, +0.47% weekly) — Euro gains traction as weaker-than-expected US June payrolls reduced expectations for Fed rate hikes, offsetting headwinds from softer eurozone inflation data.

AUD/USD (0.6941, +0.27% daily) — The Australian dollar outperforms as commodity-linked currencies benefit from risk-on sentiment triggered by cooling US labor demand and recession fears dissipating slightly.

What Moved the Tape

• Weak US June Payrolls Data — The dollar index (DXY) fell to a 2-week low and finished down ~0.52% to ~0.68% on Thursday-Friday after the US reported weaker-than-expected June employment, dampening speculation that the Federal Reserve will tighten monetary policy anytime soon.

• Eurozone June CPI Miss — Eurozone June inflation came in softer than expected, pressuring the euro earlier in the week but allowing it to recover alongside USD weakness. The ECB remains closely watching FX trends, with officials on alert for sustained euro strength.

• USD/JPY at 39-Year Highs; Japan Intervention Risk Elevated — USD/JPY hit 162.8 on Wednesday (its highest since December 1986) before declining over 1%, raising speculation that Japanese authorities could be forced to intervene. Market participants are closely monitoring BoJ communications for any shift toward active currency defense.

Central Bank Watch

Federal Reserve — Fed Chair Warsh provided no forward guidance at a meeting of central bankers in Portugal mid-week, keeping rate-cut expectations fluid. The June jobs miss has shifted markets away from near-term tightening, with fed-funds futures now pricing in greater likelihood of cuts in coming quarters.

Bank of Japan — The yen has fallen to multi-decade lows, with USD/JPY near 162. Japanese authorities are on high alert for further weakness and intervention opportunities remain live. BoJ officials have signaled readiness to defend the currency if moves become disorderly.

European Central Bank — ECB officials are closely monitoring foreign exchange trends after eurozone CPI disappointed. While the euro remains near long-term averages, policymakers are on alert for sustained appreciation or depreciation that could complicate their inflation-fighting mandate.

Emerging Markets & Asia FX

No fresh EM-specific data available for the period after July 2. Historical positioning suggests the Chinese yuan, Korean won, and Indian rupee remain sensitive to Fed pivot expectations and global risk appetite.

Strategist Takes

Citi FX Research — Dan Tobon, head of G10 FX strategy at Citi, remains a "dollar bull in a world of dollar bears," noting that while the June payroll miss has dented near-term tightening bets, the dollar may stabilize if data surprises improve. Tobon sees the dollar strengthening toward Q3 2026, particularly against the euro, Canadian dollar, and sterling.

What to Watch Next

• US Independence Day Market Closure — US equity and fixed-income markets are closed on July 4 (Friday), leaving FX activity thin and dominated by non-USD players. Expect lower volumes and wider bid-ask spreads in major pairs through Friday NY close.

• Next Week: Risk Data & Central Bank Commentary — Traders will watch for any BoJ or MOF statements regarding yen weakness and intervention; ECB speakers on growth/inflation; Fed commentary on labor-market conditions.

• Upcoming US Economic Calendar — Weekly jobless claims, producer price inflation (PPI), and consumer sentiment data in the coming week will help reset expectations for Fed rate cuts and dollar direction.

• BoJ Intervention Vigilance — Monitor daily yen moves and official statements; any sign of MOF/BoJ intervention could trigger sharp USD/JPY retracement and volatility across crosses.

Reader Action Items

1. EUR/USD Bulls Have Room — The pair broke above 1.14 on soft US data and thin holiday volumes. Watch for resistance near 1.1460–1.1475; any sustained break above 1.15 would signal a more durable dollar weakness narrative. Tight stops below 1.1400 suitable for long entries.

2. USD/JPY Intervention Risk Priced In — With the pair near 162 (39-year highs), speculate cautiously. BoJ intervention could trigger violent reversals; don't chase extended shorts. Use OCO (one-cancels-other) orders with tight stops if taking directional bets.

3. Holiday-Thinned Markets = Wider Spreads — US market closure today reduces liquidity across major pairs; avoid large positions and expect slippage. Shift focus to Monday's open when US traders return and liquidity normalizes.