USD/JPY daily chart
The verbal jawboning by Japanese officials aren’t really having much impact, as you would expect, as the yen continues to fall further this week. USD/JPY is trading higher again today, now to 144.16 as buyers are staying poised for a further push to the topside.
The question now is whether there will be actual intervention, like what we saw last October, at the 145.00 mark or the 150.00 mark (again) – or perhaps somewhere in between.
I reckon it’s more about the speed and momentum of the move and we’re more or less going at the same pace as we did in October. Back then, it took eight trading days for a 400 pips move. It also took eight trading days for a push above 140.00 this time to 144.00.
That certainly invites plenty of interest for Japanese officials to step in but so far, they have stuck to their verbal warnings. And to be fair, the look and feel of the October move was much more drastic for the yen.
At the time, it felt like the pair could be well on its way for a multi-decade breakout. This time, it just feels like yen bulls have thrown in the towel as they have grown increasingly frustrated at the lack of policy pivot by the BOJ.
In other words, the central bank and government still has a card to play before considering intervention again. All it takes is a slight tweak in the language and/or a minor tweak in policy settings next month, and that is likely to reinvigorate the currency again.
For now though, it’s a battle between buyers’ conviction and Japan trying to hold the line. If we do see a sudden spike up, don’t be surprised to see an equally sharp drop right after as there will be those taking profit amid intervention risks.