Yen Plunging, Intervention Risks Return
BOJ Rate-Check Chatter
Intervention risks are becoming the focal point again for JPY traders as the Yen continues to plunge against USD. Chatter is circulating that the BOJ conducted a rate check on Friday, prompting speculation that the bank might be about to intervene during the extended Japanese holiday, having previously capitalised on thin holiday liquidity to carry out such actions. The BOJ hiked rates to a 31-year high this month though sounded less convincing on the prospect of further tightening near term amidst the continued drop in Japanese inflation. Indeed, two policymakers dissented and voted against that hike suggesting that hawkish support is already fading within the BOJ.
Hawkish Fed Expectations
On the USD front, a raft of hawkish commentary from several Fed members this week is keeping the focus firmly on near-term tightening expectations. Market pricing for a follow-up hike from the bank next months is now above the 50% level. As such, focus turns to next week’s US jobs data. If we see further strength in the jobs market, USDJPY is vulnerable to a fresh spike higher as rate hike bets increase. Given this risk, the threat of further intervention from the BOJ ahead of that data or in response to it looks high, warranting caution from traders near-term.
Technical Views
USDJPY
The rally has seen price trading back up to retest the bear trend line from YTD highs and the 157.85-level resistance. This is a key zone for the market and a break higher here will turn focus back onto the 160.49 level next and a resumption of the bull trend. To the downside, 154.65 remains the key support level to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.