The pair is quietly one of the more notable movers in the major currencies space today, with USD/JPY up over 100 pips to 156.70 levels now. After the speculated ‘rate checks’ on 23 and 27 January, it has been a quick recovery as the yen fails to hold onto gains.
As a reminder, Japan authorities stepped in with the pair nudging above the 159.00 level. That’s an indication that they don’t want to let it come close to nearing a test or break of the 160.00 threshold. The ‘rate checks’ then sent USD/JPY down close to testing the 152.00 level. So, we’re more than 450 pips higher from the lows in just about a span of one week.
From the chart above, we can see that the pair has already more than halved the sharp drop since 23 January. And adding to that, the near-term bias has also shifted to being more bullish once again. That as we see a break back above both the 100 (red line) and 200-hour (blue line) moving averages.
The quick recovery here speaks to the continued selling and poor sentiment surrounding the Japanese yen in general. The Takaichi trade remains in full force and it is hard to shake that off even with intervention threats it seems.
The only question now is, when does Japan decide to draw a line and step in with actual intervention?
As mentioned previously, prior episodes in which they conducted ‘rate checks’ was followed up by actual intervention eventually to really knock down market players and speculators. That was the case in April 2024 as well as September 2022.
I argued last week that it should be as good a time as any for Japan to make that strike as it would be more effective in sending a message to markets. Now with ‘rate checks’ used up and we’re only down some 250 pips from the highs on 23 January, what’s the next step?
It seems that Tokyo officials might be waiting on the snap election on 8 February more than anything else. They would want to gauge the market reaction to that and then using said evidence to determine if they really need to step in.
But with Takaichi remaining favourite for a landslide victory, I’m not exactly sure what they would be hoping for.
In any case, with every big figure that traders choose to push past above the 155.00 mark, I reckon that will already be causing Tokyo officials to feel chagrined in wanting to take action. So, just be wary of that as we start to test the limits of their patience.
This article was written by Justin Low at investinglive.com.