USDJPY Slips Below 153: Understanding Intervention Levels

The USDJPY pair experienced a downward trend, slipping below 153 on Friday morning, marking a three-week low. This decline accounts for a loss of over 4.5% from its peak of 160.2 at the beginning of trading on Monday. Behind this movement lies a significant long-term fundamental factor: an expanding interest rate differential coupled with a shrinking trade surplus. The Japanese Ministry of Finance's currency interventions have contributed to this decline. Let's delve into the potential levels at which these interventions might halt.

Analyzing USDJPY Growth Impulses

The growth impulses of the yen are waning. In October 2022, USDJPY plummeted from a peak of 151.8 to a bottom of 127.3, marking a substantial 16.3% decrease over approximately three months. The pullback in November 2023 was briefer, occurring in January, and less severe, with a decrease of 7.6%.

Diminishing Yen Growth Impulses

Yen growth impulses, even without direct intervention, are also showing signs of decline. Two notable downturns in USDJPY occurred in July 2023, with a drop of around 5%, and in March 2024, with a decrease of approximately 2.7%, driven by speculation surrounding the Bank of Japan's potential shift to active monetary tightening.

Authorities' Approach to Intervention

The Japanese authorities are exercising caution in utilizing foreign exchange reserves, opting for more measured interventions compared to the strategies employed in the 1990s. Interventions are timed during periods of low FX liquidity to maximize their impact on the charts while minimizing expenditure.

Slow Pace of Monetary Policy Tightening

The Bank of Japan has been notably sluggish in tightening its monetary policy. Despite a rate hike in March, further tightening measures, widely anticipated, have yet to materialize. This gradual approach aligns with the trend of Japan's monetary policy in recent years, which focuses on impeding the yen's decline rather than actively promoting its growth.

Potential Scenarios for USDJPY

As USDJPY approaches the 50-week moving average, interest in yen appreciation may diminish abruptly. This was evident in 2023 when the pair approached the 50-week moving average, which is currently positioned around 147. An alternative scenario involves a more substantial decline towards 122, a level where the pair previously peaked in 2007 and 2015, although this outcome cannot be entirely discounted. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Disclaimer: The author does not own any of these shares. This content, which is prepared for purely educational purposes, cannot be considered as investment advice.? ?