This week’s trading has seen the yen continue to weaken, creating a difficult situation for Japan. The Bank of Japan did not provide much support as USD/JPY has now risen to the 156.00 level, its highest level in over 30 years. So what’s next for this pair?
USD/JPY daily chart
For now, buyers are cautiously raising prices. And unless it’s a movement in progress, too far, too fastan intervention drama from Tokyo may not occur. still.
The line in the sand is definitely changing and that’s something we have to acknowledge. The question now is, will 160 be that new threshold? Or will it be sooner?
I would argue that, at least for today, only two things remain of note.
First, there was a press conference by Bank of Japan Governor Ueda. Traders will be watching this information for clues as to whether the pair will continue to push the agenda here to push the USD/JPY boundaries.
It is hard to imagine Mr. Ueda giving traders a clear green light for a sharp rise in USD/JPY. But he will have to strike a difficult balance, especially since recent inflation data have not been encouraging enough to support a hawkish stance.
Given the circumstances, even a temporary yellow light could be enough for traders to continue bidding USD/JPY higher. Therefore, the challenge for Ueda is to manage it and not let price fluctuations get out of control.
Another thing to watch today will be the second half of US trading. Typically, when central banks intervene, they tend to do so at the most efficient and cost-effective times. And that usually means during periods of reduced liquidity. Given our current situation, there is only one window left for them to do so, and that could be just before the weekend market closes.
This could lead to profit-taking selling later in the day. So please be careful about that.
