- The Japanese yen has failed to maintain momentum despite intervention by authorities to stem its weakness.
- The yen has fallen sharply, and policymakers have repeatedly indicated that they are prepared to intervene to support the currency.
- But is it too little, or too late?
According to data compiled by Bloomberg News, Tokyo is likely to enter the forex markets for a second day in a row on Friday, pumping in about $13.5 billion. Clearly, this comes after Japanese officials may have intervened with close to $20 billion. According to forex trading, the US dollar against the Japanese yen USD/JPY stabilized around the 158.80 level, recovering from recent selling that pushed it towards the 157.15 support level.
Commenting on the performance of the Japanese yen, Hirofumi Suzuki, Chief Forex Analyst at Sumitomo Mitsui Banking Corporation, said in an interview with a business news network, “This indicates that an intervention in the range of 2 trillion yen is very likely.” He added, “I believe the strategy aimed to prevent market participants from anticipating the move.”
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If this step is accurate, the latest intervention comes a month after currency regulators intervened in the forex markets with a $36 billion move. Experts claim that Tokyo leaders are using these measures simultaneously with the release of U.S. data and foreign speculators. However, market observers suggest that these actions signal to traders that the moves are too small, with observers calling for more substantial funds to support the yen.
Obviously, this was evident in the weakness of the Japanese yen at the start of the trading week. The yen is down 12% year-to-date against the US dollar.
However, U.S. officials have warned against excessive intervention, even though U.S. Treasury Secretary Janet Yellen and her counterparts in Europe and Asia have given the green light for intervention. What’s next? Japanese Chief Cabinet Secretary Yoshimasa Hayashi told reporters on Tuesday that the Japanese government is prepared to take all possible measures to prevent further deterioration of the yen. According to Reuters, he stated, "It is important for forex rates to move stably, reflecting fundamentals. Excessive volatility is undesirable. We will closely monitor exchange rate developments and stand ready to take all possible measures."
USD/JPY Technical analysis and Expectations Today
Based on the daily chart attached, the USD/JPY is in a neutral position with a bearish bias if it moves further below the 158.00 level. On the other hand, and over the same time frame, the 160.00 psychological resistance level will remain the most important for bulls to regain control of the trend again. Technically, the Japanese yen price will continue to move according to whether Japan intervenes in the forex markets or not. Ultimately, The US dollar price is dependent on the future of the Federal Reserve's policy and the reaction to the results of US data.
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