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USDJPY Hits Record Levels
Fears of BOJ intervention in the FX market are at heightened levels today following the breakout in USDJPY seen yesterday. The pair moved to its highest level since August 1990 yesterday as hotter-than-forecast US inflation effectively ruled out a rate cut in June, sending USD surging higher. The pair has been a key focus point for traders over the year so far, trading higher by more than 9%. Despite the BOJ making an historic tightening move last month, JPY was unable to find any upside momentum and speculators have continued to drive JPY lower.
Intervention Risks Growing
On the back of the continued weakening we’ve seen in JPY since the BOJ meeting we’ve heard from a slew of Japanese officials including members of the BOJ as well as members of government, warning over intervention risks. The general line has been that officials are watching the market and will take action against any disorderly moves. Today, that it is monitoring USDJPY through 152, 153 and 154 and assessing the backdrop of what’s happening when rate shit those levels, not merely responding to the levels being hit.
Speculators Pushing JPY Lower
The sense among those selling JPY is that officials are caught in a very hard place and will need to use any actions very wisely in order to help drive JPY meaningfully higher. Prior episodes of intervention have yielded short-lived reactions and the BOJ will be keen to avoid this. For now, USDJPY remains bullish though traders should be wary of building intervention risks here and, consequently, volatility risks.
Technical Views
USDJPY
The rally in USDJPY has seen the market breaking out above the 151.81 level which had capped price over recent weeks. While above here and with momentum studies bullish, 155.19 is the next target for bulls. Should we see any corrective action, 148.98 is next support to note.
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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.