It may be a Japanese market holiday today but it’s always best to be reminded that the forex market doesn’t sleep. Amid thinner liquidity conditions, it seems that the MOF has instructed the BOJ to step in once again today. The latest comes as USD/JPY claws its way back up to above 157.00, before being hit with sharp selling.
Looking at the chart, it seems like we’re slowly figuring out the pain threshold for Japanese officials for now. The Friday drop also occurred after the push back above the 157.00 level but towards the end of Tokyo trading.
USD/JPY hourly chart
Interestingly enough, the drop seems to be met with strong bids closer to the 155.50-70 region. And that has been the case since Thursday last week already.
Even with a reported $35 billion intervention spending at the time and likely more on Friday as well as today, Japanese officials are finding it tough to break this market.
The upside momentum also features a technical cap from the 100-day moving average, seen at 157.26. So, that is perhaps one potential technical layer that they are looking to draw the line at as well as any bounces back above the 157.00 level. That at least for the time being.
The question now is how much appetite does the MOF have in terms of trying to break traders’ conviction in continuing to sell the yen? The fundamental backdrop is certainly working against them as everything at the moment is overwhelmingly yen negative.
It’s also best to be reminded that while Japan has a massive war chest in terms of foreign currency reserves to deal with the situation, not all of that consists of liquid cash deposits. As mentioned here, the large chunk of that are tied to foreign securities and that could make for a tricky situation still.
