It’s a tough spot for Japan as the yen continues to slip in trading this week. The BOJ didn’t offer much help as USD/JPY now runs up to the 156.00 level, its highest in over three decades. So, what’s next for the pair?
USD/JPY daily chart
For now, buyers are cautiously taking price higher. And as long as that is not a move that is going too far, too fast, it might not trigger any intervention plays from Tokyo yet.
The line in the sand is definitely shifting and that is something we’ll have to acknowledge. The question now is, will 160 be that new threshold? Or is it going be any earlier?
For today at least, I would argue that there are only two things left to watch.
The first will be BOJ governor Ueda’s press conference. Traders will be looking to that for clues on whether to keep pressing the agenda here in pushing the boundary in USD/JPY.
I can’t imagine Ueda giving a clear green light to traders to rocket USD/JPY higher. But he has a tough balancing act to do, especially since recent inflation data hasn’t been too encouraging to support a much hawkish stance.
Considering the circumstances, even a tentative yellow light would be enough for traders to keep bidding USD/JPY higher. And so, the challenge is for Ueda to manage that and not let price action get out of control.
The other thing to watch out for today will be in the later hours of US trading. Typically when central banks intervene, they tend to do so at the most efficient and cost-effective time. And that usually means during periods of reduced liquidity. Given where we are at now, there might only be one window left for them to do so and that is right before the market closes for the weekend.
As such, that could also invite some profit-taking later in the day. So, just be wary about that.