- The USD/JPY outlook remains strongly bearish as intervention risks, a hawkish BoJ, and a weaker dollar ignite a reversal.
- The report of the NY Fed verifying USD/JPY levels with the dealers was considered a hint of intervention.
- Markets await the FOMC rate decision and Japan’s key data releases for more trading opportunities.
The USD/JPY price remains affected by intervention risk, Fed uncertainty, Japan’s domestic politics, and fiscal policy. This blend has caused fast, two-way swings. It also makes rallies harder to sustain.
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The yen soared when investors interpreted government activity as a hint of intervention. News that the New York Fed verified USDJPY levels with dealers was important. Traders usually view that as a warning sign, not a call.
The speculation about positioning was forced to end quickly. With the yen 3% stronger than Friday’s lows, the short-covering squeeze appeared typical. The USD/JPY pair fell to the mid-153s in the process.
Japanese officials reinforced the message instead of soothing it. The Prime Minister promised “necessary steps” to limit speculative moves. The top currency diplomat emphasized coordination with the US and called it “appropriate”. The Finance Minister avoided commenting on the “rate check” discussion.
Japan’s domestic situation is also complicated. The Bank of Japan voted 8–1 to maintain its 0.75% policy and said it could tighten further. Political timing and budget uncertainties affect bond supply and risk premia concerns.
On the US side, the dollar was already weak. Before the Fed meeting, traders remain cautious as no rate change is predicted. Due to policy noise and uncertainties regarding future Fed leadership, long USD conviction is tougher to regain.
Moving ahead, market participants will watch Japan’s data, like the Tokyo CPI, jobs, industrial production, retail sales, and any news that confirms intervention. Credibility is still the most important factor. If traders perceive the government defending a line near JPY 160, traders will be less likely to chase USDJPY higher.
USD/JPY Technical Outlook: Strong Bears Break Demand Zone
The USD/JPY 4-hour chart shows the market opening with a bearish gap and the trend breaking the key demand zone at the 154.50 area. The straight fall of around 600 pips has turned the pair oversold on the RSI, which could lead to potential consolidation around the current levels.
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The pair could correct to the 154.50 area ahead of the 155.00 level. On the flip side, a continued bearish trend could push the prices lower to 153.00 ahead of 150.90. The key MAs suggest a higher probability of another down leg.
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