A volatile start to the week for the yen after currency intervention

Volatile price action across yen pairs on Friday quickly saw the finger pointed at the BOJ (Bank of Japan) and MOF (Ministry of Finance) for currency intervention. After rising to just 6 pips below 152, USD/JPY fell over -3.9% to touch a low of 146.2 within two hours during its second most volatile day since March 2020 (and coming a close second to when the MOF intervened in September).

Whilst the MOF has since declined to comment on whether they intervened, such action has not come without multiple warnings from officials. The MOF last week said they will deal with speculators ‘severely’ and the strong price reaction on Friday suggests they did just that.

Everything you should know about the Japanese yen

We can see on the weekly chart that USD/JPY closed back below its 1998 after the suspected currency intervention. It was also the first week to close lower after a 9-week bullish streak, six of which were above the upper Keltner band which screams of over-extension. Furthermore, the weekly candle is some form of a Doji or bearish hammer, which raises the potential that an important swing high has been seen. The fact is that we have not really seen a correction since the June 2021 high, and with central authorities determined to stop the yen’s fast depreciation and the potential of a Fed pivot resurfacing, it is not impossible to believe that the yen is now within a corrective period.

USD/JPY daily chart:

Price action has also been erratic in today’s Asian session, which points to another probable intervention. USD/JPY had recouped around 60% of Friday’s losses by the Tokyo open, but prices then fell around -3% and took out Friday’s low. Incidentally, today’s low also traded beneath the level which the MOF intervened before springing higher once more. But the message seems clear enough; the MOF no longer want the yen declining in a straight line, and would sooner it appreciated. Perhaps traders would be better selling rallies than buying dips as we head towards the BOJ meeting on Friday, as this is what the MOF appear to be doing.

And Friday’s meeting – where the BOJ are expected to keep policy unchanged and reiterate their ultra-loose stance – no doubt creates issues for the MOF. Which is why traders would be wise to expect further intervention if traders continue to goad such an action by selling the yen against anything and everything. It is also worth remembering that the MOF last intervened following the BOJ’s September meeting. Only this time they appear to be front-running the meeting instead of reacting to it.

Ultimately, I suspect price action will remain erratic heading into Friday’s BOJ meeting. But the bigger question is whether we have witnessed an important top and are now within its first notable retracement since July 2021.

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

Open a Forex.com account, or log in if you’re already a customer.
Search for the pair you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.