[MARKET ANALYSIS] USD/JPY continues to extend into intervention territory as G7 FX (ex-JPY) trade in tight ranges ahead of US CPI

• DXY continues to grind back higher towards 99.00, as continued weakness in the JPY helps the greenback pare back some of the losses seen in Monday’s session following heightened worries over Fed independence.
• EUR/USD continues to grind lower, finding a trough at 1.1656, but remaining in tight ranges as the market awaits the US CPI report.
• GBP/USD is oscillating in a tight 13 pip range from 1.3463 to 1.3477. BRC retail sales ticked lower to 1.0% Y/Y from 1.2%, but this failed to spark a reaction in cable.
• USD/JPY initially saw weakness following comments by Japan’s FinMin Katayama stating that US Treasury Secretary Bessent shares the concerns over the weak JPY, signalling potential intervention on the horizon. However, the speculation on whether PM Takaichi may dissolve parliament may, in part, be driving recent price action, with USD/JPY reversing higher and peaking at 158.50.
• Antipodeans continue to be the outperformers, with NZD/USD and AUD/USD both seeing gains of 0.1%, as these high-beta currencies continue to track the performance of XAU, despite the yellow metal trading -0.2%.
• CNH experienced modest weakness following a weaker CNY fixing vs expectations for a stronger fix. 

The USD/JPY is approaching levels that suggest intervention could be imminent, particularly as comments from Japan’s Finance Minister indicate shared concerns over the weakened yen. This could imply potential volatility in the pair as the market braces for upcoming US CPI data, which might further influence USD dynamics. Keep an eye on how the Fed's positioning and potential monetary responses may impact the broader risk sentiment leading into this data release.