USD/JPY Tumbles Amid Suspected Japanese Intervention and Weak US CPI Data

The USD/JPY pair continued its downward trajectory on Friday (July 12th), closing 0.56% lower at 157.91 in New York trading. This follows Thursday’s significant drop, with the pair briefly touching 157.30, its lowest level since June 17th.

Key Developments

  1. Suspected Japanese Intervention: Market sources suggest that Japanese authorities intervened in the currency market, taking advantage of the dollar’s weakness following soft US Consumer Price Index (CPI) data. The reported intervention amount was a substantial 3.57 trillion yen ($22.43 billion), coming less than three months after their last intervention.
  2. Continued Pressure: Friday’s movement in USD/JPY could be the result of ongoing intervention or currency checks by Japanese authorities.
  3. US CPI Impact: Thursday’s weaker-than-expected US CPI data initially pushed the dollar lower, providing an opportunity for Japanese authorities to act.

Outlook for the Yen

For a substantial change in the yen’s direction, more significant measures from the Bank of Japan (BOJ) may be necessary. These could include:

  • Stopping bond purchases
  • A substantial rate hike at the end-of-July policy meeting

Without such decisive actions, a sustained yen recovery may prove challenging.

Technical Analysis

  • The 4-hour chart shows two consecutive bearish candles, indicating increased selling pressure on USD/JPY.
  • Support around 157 held on both Thursday and Friday, suggesting some buying interest at these levels.
  • If 157 breaks, the next downside target could be the 155-153 range.
  • The 162 level now represents significant resistance.

Conclusion

While Japanese intervention has provided short-term support for the yen, long-term trends will likely depend on more substantial policy shifts from the BOJ. Traders should watch for any signs of further intervention and upcoming economic data that could influence both US and Japanese monetary policy decisions.