I thought we might see some real currency intervention today after Japanese Finance Minister Katayama said he was ready to take “decisive action” on speculative moves in the yen.
This comment caused a rapid decline to 161.00 from 161.70 but the pair quickly rebounded to 161.30 and has been trading there ever since. If we finish around those levels, we will record the highest weekly close since 1986 today.
It is a dangerous game to buy USD/JPY around these levels given the threats of intervention but the market does not appear to be afraid, even going into the weekend. Japan has spent about $73 billion defending the yen so far this year, and that has not deterred the market.
If there is no move higher at these levels, the market may take it as a green light to pull the USD/JPY pair to the 165.00 level.
Yen weekly
Ultimately, I don’t think the weekly close is as important as the intraday levels. The Treasury will likely be looking at 161.99, which was the short-term high on July 1, 2024. Starting that month, USD/JPY fell to 140.00 with the bulk of that arriving in five consecutive weeks from the beginning of July.
I don’t see a risk reward in USD/JPY longs at the moment but the fundamentals certainly hold and this week’s dovish press conference by Kevin Warsh gave the market enough reasons to buy the dollar.
This may prompt some in Japan to keep an eye on the EUR/JPY pair. The pair is still within the narrow range it has been trading in since November and is located right in the middle of this range.
USDJPY weekly
Looking ahead, I expect so at least To get a barrage of pro-yen chatter in Japan next week. I will be keen to monitor the start of the week but officials also had an opportunity to intervene in today’s liquidity decline and they overcame it. The US is on holiday with stock markets closed.
