Key Points
- BoJ intervention totals a staggering $33bn.
- Price action to dominate over news.
- DXY brushes off weaker NFP report.
- Time to buy USDJPY dip?
The Scale of Yen Intervention
The Bank of Japan intervention story has been one of the biggest in 2024. Central bank intervention is not a small matter, and people should use extra caution when trying to get involved. At one point last week, USDJPY had fallen 850 pips (or 5.2%) in just a few days of trading, and the swings within the move could have easily been account busters.
The Bank of Japan’s intervention, estimated to be a whopping $33 billion in Japanese Yen, has the potential to reshape the USDJPY market. With the Japanese Yen ranking as the worst-performing currency in developed economies, there are concerns it could follow the path of the Turkish Lira. This large-scale intervention might just be the beginning, as more actions could be necessary to undo the years of damage.
Key Events
In the absence of any real economic drivers in US markers this week, expect price action to rule the roost. This is a complete reversal of last week, where markets couldn’t catch a break. The only two high-impact US news events this week that will impact USDJPY are Unemployment Claims and The University of Michigan Consumer Sentiment Index, both out later this week.
There has been some Fed talk early this week as traders digest last week’s interest rate decision. Richmond Fed President Thomas Barkin and New York Fed President John Williams both sounded hawkish in their remarks about inflation, stating it “needs time”.
DXY Brushes Off NFP Miss
Friday’s job report came in softer across all three components, something not seen for quite some time. The number of jobs came in at 175,000, which seems weak in comparison to the 300,000+ reports. However, in reality, this is still a robust job market. The concern comes from unemployment, which ticked higher to 3.9%.
The price remains bullish, and the daily candle that formed on Friday from NFP has been completely reversed, suggesting the bulls are wrestling back control. 104.225 is a daily order block and remains an enticing support area for buyers. However, we could see the DXY grind higher above 105.500 before this move.
USDJPY – Time To Buy The Dip?
As for USDJPY, it is now clear that the $30bn of Yen intervention has been baked into the market, and it is now on a higher grind. In fact, the market reacted in textbook fashion after it filled the Fair Value Gap (FVG) at 151.900.
Considering the potential for further intervention from the Bank of Japan, it’s crucial to be prepared for various scenarios. If there’s no more news on intervention, we could see a move up toward the first Fair Value Gap (FVG) at 155.500 and, beyond that, the second one at 157.000. However, any more intervention is likely to push USDJPY down to the equal lows and sell-side liquidity at 150.820.
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Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
