By pushing the USD/JPY higher, FX traders could call the bluff of the Japanese authorities and try to reach purchase stops that are probably grouped above the multi-year peak of 160.24 set in April.
Trader caution prevented the yen from being punished too much versus other currencies this week out of fear of intervention brought on by threats from Japanese policymakers. On Tuesday, Yoshimasa Hayashi, the Chief Cabinet Secretary, stated that the government would react suitably to extreme fluctuations in currency values.
Recall that earlier in 2024, the Japanese government intervened in the foreign exchange market to support the value of the Japanese yen, spending around 9.8 trillion yen. As a result, the USD/JPY fell from 160.24 to 154.40 (April to May) on the EBS.
A extremely bullish technical development occurred last week when USD/JPY closed back above the 158.26 Fibonacci level, a 76.4% retracement of the decline from 160.24 to 151.86. Now that the market has nearly fully recovered, Japan’s frequent warnings of action would be put to the test if USD/JPY manages a sustained break above the 160.24 top.
