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Intervention Risks Growing
The threat of fresh FX intervention from Japanese authorities is growing stronger this week. USDJPY has traded back up to just shy of the level that sparked intervention back in April, fuelling speculation of fresh action. The latest push higher comes on the back of the recent BOJ meeting which saw the bank keeping policy unchanged for now. The bank noted that it was discussing options around reducing monthly bond purchases, with details to be announced at the July meeting. However, traders were seemingly a little disappointed with the BOJ’s cautious approach and Yen has been punished subsequently.
JPY CPI Rises
Overnight, the latest BOJ core CPI reading was seen jumping to 2.1% from 1.8% prior, above the 1.9% the market was looking for. The data adds to the view that the BOJ is gearing up to tighten policy next month with some traders suspecting the bank will announce a surprise rate hike alongside a reduction in bond purchases. The question now is whether Japanese authorities will be forced to intervene ahead of that meeting given the ongoing weakness in JPY?
US Data on Watch
With a slew of US data due across the week, any fresh USD upside could have serious implications for the pair, leading to fresh intervention action. On the other hand, if we see any USD downside as a result of data weakness this might help avoid a fresh intervention event. Nevertheless, high volatility risks are seen if we persist around current levels.
Technical Views
USDJPY
For now, the pair is sitting just below the 160.27 highs. While above 154.74 and within the bull channel, the focus is on a continuation higher with the bull channel highs the next target. However, we are seeing strong bearish divergence in momentum studies flagging potential reversal risks.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.