Yen Under Pressure

USDJPY is on watch this week with the Japanese Yen holding around 40-year lows on the back of the recent rally in the pair. Price ahs surged almost 5% of the May lows taking the pair back up through the level at which we saw intervention around the end of May. The recent push higher has been accompanied by fresh verbal warnings from Japanese authorities and there is speculation now that Thursday’s US jobs data could be the catalyst for a fresh sale of Dollars by the BOJ.

Japan Verbal Warnings

 Last week we heard from Japanese Fin Min Katayama as well as the country’s top FX diplomat Mimura who both warned that authorities stand ready to defend the Yen against excessive price swings. The fact that no new action has been taken despite price moving above the prior 160 intervention level suggests that the govt and the BOJ are waiting to see Thursday’s US jobs data.

NFP Scenarios

If jobs data comes in above forecasts, causing a fresh spike higher in USD, this will likely be the moment we see fresh action to help bring JPY higher. However, if data undershoots forecasts, leading to a dovish repricing in the US rates outlook and a fresh move lower in USD, this could buy authorities some time or alternatively provide a stronger platform for them to take action and push USDJPY down lower. AS such, there are big volatility risks this week especially with US markets then offline on Friday for the long weekend.

Technical Views

USDJPY

For now price remains stalled at the 161.95 level which, if broken, will turn focus to a test of the bull channel highs above. To the downside, 157.85 and the bull channel lows will be the key support to watch with 154.65 the deeper level below to note.