- USD/JPY at 32 Year Lows as 150.00 Psychological Level is Finally Reached.
- Potential BOJ Intervention Rests on Volatility Rather Than Price.
- Have the BoJ Conducted Stealth Intervention Already?
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USD/JPY Fundamental Backdrop
USD/JPY continued its march toward the key psychological 150.00 mark as investors remain cautious of potential intervention by the Bank of Japan. Yesterday saw the return of dollar strength as continued hawkish rhetoric from central bank policymakers and inflation concerns continue to weigh on sentiment.
The Bank of Japan (BoJ) did announce a bond-buying operation in the Asian session as the 10-year yield jumped above the upper limit of 0.25% set by the central bank. The BoJ is under pressure as speculation continues to mount regarding an end to its negative rates policy which is being blamed for the currencies ongoing weakness. Governor Kuroda himself has insisted that he will stick to monetary easing as the economy still requires support. The belief is that a policy shift may only occur when Governor Kuroda steps down in April 2023.
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Intervention talk has kept markets on alert as Governor Kuroda, Finance Minister Suzuki and Prime Minister Kishida have all made similar comments of late. The rhetoric has not changed much with Finance Minister Suzuki going on to say that they are watching markets closely and will respond to excessive moves. The BoJ has insisted that price levels are not being targeted but rather volatility and the pace of the Yen’s decline will be the deciding factor.
Following last week’s US CPI print there was some unusual price moves on the pair which resulted in whispers of stealth intervention by the BoJ. While a Ministry of Finance Official refused to comment, top currency official Masato Kanda did mention stealth intervention as a possible option last month. Stealth intervention is hard to detect and given Kanda’s comments that the Finance Ministry might not confirm every intervention conducted by the BoJ, speculation continues to mount. The continued hawkish rhetoric by the US Federal Reserve is unlikely to shift anytime soon adding further pressure as the BoJ head toward their next policy meeting on October 28.
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USD/JPY Daily Chart – October 20, 2022
Source: TradingView
From a technical perspective, there remains little in the form of recent price action to help map out key levels on the pair. Any pullback in price due to intervention could see a retest of the 1998 high around 147.750 while a deeper correction could find support at the 20 or 50-SMA. There remains little in the form of resistance above the 150.00 psychological level with the next resistance area resting around 160.00, adding credence to the need for BoJ Intervention.
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Key intraday levels that are worth watching:
Support Areas
•147.750
•146.000
•142.500
Resistance Areas
•150.000
•160.000
| Change in | Longs | Shorts | OI |
| Daily | -3% | 8% | 6% |
| Weekly | -17% | 16% | 9% |
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Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
