USD/JPY Slips as Intervention Talks Surface

USD/JPY experienced a slight decline following remarks from Japan’s FX chief, Masato Kanda, regarding potential intervention in the currency market. Kanda attributed Yen’s recent weakening to speculation rather than fundamental factors and hinted at possible measures to stabilize the currency.

The pair, trading around the 151.300s, dipped after Kanda’s comments heightened speculation about Japanese authorities intervening in the market. During their recent policy meeting, Kanda, serving as the vice-finance minister for international affairs, addressed concerns about the Yen’s historic lows following the Bank of Japan’s surprise decision to raise interest rates for the first time in over a decade.

According to Kanda, the current Yen depreciation is driven by speculation and does not align with fundamental economic factors. He stated that appropriate action would be taken against excessive fluctuations, leaving all options open.

When asked about the possibility of direct intervention, Kanda emphasized the authorities’ readiness to act. Historical data indicates that the BoJ has intervened when the USD/JPY exchange rate approached or exceeded the 150.000 mark, as seen in 2022.

Market data supports Kanda’s assertion that speculators influenced the recent Yen depreciation following the BoJ’s rate hike decision. Hedge funds and other speculators increased their bearish bets on the Yen despite expectations of a rate hike.

From a technical standpoint, the USD/JPY chart shows a bearish Hanging Man candlestick pattern, indicating a potential short-term reversal and pullback. Friday’s candlestick confirms this pattern, suggesting further downside.

While short-term reversal patterns like the Hanging Man indicate temporary moves, a continued pullback could target the 50-day Simple Moving Average (SMA) support at 149.123. Conversely, a clear break above 152.000 would signal bullish momentum, although sustained upward movement may face resistance.

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