On Friday, August 21, the USD/JPY pair was trading around 158.80. Compared to its high above 163 in late July, the exchange rate has clearly retreated, but after touching around 155 in early August, it entered a period of consolidation. Therefore, the core market focus has shifted from simple carry trades to expectations of Bank of Japan policy normalization, policy divergence with the Federal Reserve, and the repricing of inflation quality between the two countries. Japan's July Consumer Price Index (CPI) rose 1.9% year-on-year, higher than June's 1.6%; the core CPI, excluding fresh food, rose 1.8% year-on-year, and the index excluding fresh food and energy rose 1.9% year-on-year. All three figures showed improvement compared to June and were largely in line with market expectations. However, for the foreign exchange market, simply observing a resurgence in inflation is insufficient to directly deduce the Bank of Japan's (BOJ) policy pace. The BOJ's July outlook report projected a median core consumer price index (CPI) of 2.5% for fiscal year 2026, with the median reference forecast excluding fresh food and energy also at 2.5%. Therefore, the current real year-on-year growth rates of 1.8% and 1.9% are still below the full-year forecast path. Meanwhile, the BOJ expects medium- to long-term inflation expectations to gradually approach 2% from the second half of fiscal year 2026 to fiscal year 2027. This means policy decisions need to distinguish between two types of price pressures: one stemming from energy, raw materials, and exchange rate transmission, and the other from sustained inflation driven by wages, service prices, and domestic demand. The former may significantly push up short-term data but does not necessarily imply a corresponding increase in actual demand. The BOJ itself has emphasized the need to observe the transmission of wages to prices and whether underlying inflation can be sustained. Regarding economic activity, the preliminary manufacturing purchasing managers' index (PMI) rose to 55.1 in August, the services PMI rose to 52.3, and the composite output index reached 53.4, representing a relatively rapid expansion in six months. The particularly strong growth in new orders for the manufacturing sector indicates resilience in business activity at the beginning of the third quarter. The current interest rate market is pricing in a high probability of a rate hike at the Bank of Japan's September meeting. The market has already largely priced in a 25 basis point hike at the next meeting, with a cumulative tightening expectation of approximately 75 basis points over the next 12 months. This is precisely the part easily overlooked in the current USD/JPY pricing. Policy direction and market impact are not the same concept. Even if the Bank of Japan continues to normalize interest rates, as long as the actual policy path does not significantly exceed what the swap market has already priced in, the marginal impact of new information on the exchange rate may decrease. On the other hand, Japanese government bond yields have already risen significantly. On August 18, the 10-year Japanese government bond yield rose to 2.945%, reaching a multi-decade high, while the 2-year yield also rose to around 1.7%. The overall rise in the yield curve means that the market has already absorbed a considerable portion of the monetary policy normalization information. Therefore, the focus going forward is not simply judging whether the Bank of Japan will adjust its policy, but whether policy statements, wage-price cycles, and consumption data can continuously change the market's valuation of final interest rates. There is no single easing logic for the US dollar. The Federal Reserve's July meeting maintained the target range for the federal funds rate at 3.50% to 3.75%, with a vote of 9 in favor of maintaining the rate and 3 in favor of a 25 basis point hike. The official statement indicated that economic activity was still expanding, while noting that inflation remained above the 2% target. However, the job market has clearly lost its previous high-growth characteristics. Non-farm payrolls fell by 23,000 in July, and the unemployment rate was 4.1%; the combined employment figures for May and June were revised down by 103,000. Average hourly earnings in the private sector increased by 3.2% year-on-year, significantly lower than the growth rate during periods of high labor shortages in previous years. The Fed's previous monetary policy report suggested that, given strong productivity growth, current wage growth is broadly compatible with the long-term 2% inflation target. Therefore, the pricing of dollar interest rates faces a dual constraint. Continued cooling in employment reduces the need for further policy tightening; however, inflation remaining above the target limits the scope for a rapid shift to easing. This increases the sensitivity of the dollar/yen exchange rate to data, as the exchange rate is now reflecting both policy curves simultaneously, rather than just the Bank of Japan's unilateral changes. Observing the daily chart, after a rapid decline in USD/JPY at the end of July, the price in August mainly fluctuated around the medium- and long-term moving averages. The Bollinger Band middle line has adjusted downwards, with the price below it, while the rate of decline of the lower band has slowed, indicating that the previously rapidly expanding volatility is gradually rebalancing. Regarding the MACD, the DIF and DEA lines are still below the zero line, but the distance between them has narrowed significantly compared to the previous period, and the histogram has also shifted from a large expansion to convergence. This structure reflects that short-term momentum has changed from the sharp changes at the end of July, but the medium-term trend indicators have not yet completed their rearrangement. The 200-day moving average has recently become a frequently discussed indicator in institutional technical research. However, due to differences in daily chart segmentation time, quote sources, and moving average algorithms, the calculation results may not be entirely consistent across different data sources. Therefore, it is more appropriate to understand it as a technical observation indicator near the medium- and long-term cost zone rather than a single trading price. Currently, traders should pay more attention to whether technical signals are synchronized with macroeconomic variables. When moving average systems tend to converge, and the policy expectations of the Bank of Japan and the Federal Reserve change simultaneously, exchange rate fluctuations often stem more from a rapid correction of the interest rate expectation gap than from a single technical breakout in the traditional sense.