USDJPY Sinks 550 Pips On Talk Of BoJ Intervention – Can It Save The Yen?

Key Points

• BoJ threatens intervention amid huge Yen losses.
• USDJPY slumps nearly 600 pips.
• DXY bears creep into the market. 
• Markets remain tense ahead of NFP Friday.

Has the Bank of Japan Intervened?

This story has been bubbling under the surface for some time. From the start of 2024 to its fresh 34-year high printed this morning, USDJPY has gained nearly 2000 pips or 13.8%. This is quite a staggering return and has rewarded anyone buying any sort of retracement with healthy profits.

However, as the Japanese Yen has continued to weaken against pretty much everything, this question has risen to the surface: “Will the Bank of Japan Intervene?” Well, that question is closer to an answer today after the recent 550 pip drop, and traders suspect that some intervention has already occurred. There has been no official announcement, and, rather conveniently, Japan is on a national holiday today. 

Key Events 

There is plenty to contend with this week when it comes to market movers. The most obvious is any fallout from the recent Yen strength and whether the Bank of Japan communicates anything at all. Despite this, though, we need to be aware of some scheduled high-impact news events. The first is the Federal Reserve interest rate decision on Wednesday. Rates are expected to remain at 5.50%, but it will become communication around any rate cuts that will get the markets moving.

Traders will only have a day to digest the decision because on Friday, it’s US Non-Farm Payrolls Day, and this normally causes fireworks! The current forecast is for jobs to fall to 243k from 303k the month before. This, though, would still represent a robust US jobs market. 

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DXY Pauses As Bears Creep In

The H1 Dollar Index chart in front of you paints a messy picture, typical of a market catching its breath. The DXY has been on a remarkable bull run lately, but the bears are attempting to creep in as the market has fallen from its yearly highs.

The price clearly finds support at 105.000, as this level has seen a bullish reaction on five occasions in a short space of time. Moreover, sell-side liquidity was taken as 105.000 was flushed out on Friday. This could be a catalyst for a move back up towards 106.000 today.

USDJPY Sinks, Buyers Already Stepping In

As for USDJPY, the sheer scale of the move lower overnight is evident. Ironically, this market still shows a bullish market structure. The move lower started from 160, which represented a 34-year high.

Some argue the Bank of Japan has already intervened, but there has been no official announcement yet. Should there be, expect the trend to change quite rapidly to bearish, depending on the nature of the intervention. Until then, you can see that sell-side liquidity has been taken at 154.500, and the buyers are attempting to step back in. There are lots of pips on offer here.