The USD/JPY pair collapsed almost 600 points at the end of the trading week. The multi-week upward trend was expected to end with a collapse. Bulls on the pair updated the 32-year price high on Friday, getting close to the boundaries of the 152-th figure. And, apparently, this target fulfilled the role of the notorious "red line" for the Japanese authorities: they decided to conduct a currency intervention again.
By and large, there was no doubt that the Japanese government would react to the rapidly falling yen. The only question was at what stage of USD/JPY growth the Ministry of Finance would intervene in the situation. In the previous month (and before that – in 1998), the red line corresponded to the 146 mark. However, this time the Japanese authorities decided to show restraint, observing the process of devaluation of the national currency. The fact is that the effect of the September intervention was short-lived. The USD/JPY pair collapsed by 500 points, but regained some of the lost positions on the same day. Traders took advantage of the downward pullback of the price and opened long positions en masse. The result was not long in coming: in less than a month, the pair "walked" a thousand points, breaking both the marks of 146-147, and even the mark of 150. Judging by yesterday's dynamics of the USD/JPY price (in the first half of the day), many traders tried to have time to "jump into the last car of the departing train." But after overcoming the 150.00 mark, any open longs resembled a lottery bet rather. Obviously a losing lottery, given the previous warnings of the Japanese authorities that the government may conduct a second currency intervention.
Just yesterday morning, a few hours before the collapse of USD/JPY, Japanese Finance Minister Shunichi Suzuki expressed concern about the sharp weakening of the national currency, expressing readiness to intervene to support the yen. However, this hint, which was more than transparent, "did not reach the addressee." The pair rose to the level of 151.96 in a few hours – this is a new high since 1990 (by the way, over the past 12 months, the Japanese currency has depreciated by more than 30%). However, during the US session on Friday, the yen unexpectedly strengthened by 600 points, giving rise to rumors of another currency intervention.
It is noteworthy that the Japanese authorities decided not to officially explain the reasons for the sharp strengthening of the national currency. Answering a direct question from journalists, Minister Suzuki told reporters that he would not comment on whether the intervention took place or not. His deputy, Masato Kanda, answered the journalists' question with a similar phrase: "I cannot comment on this information."
However, insider information published by the Nikkei agency suggests that the Japanese authorities did indeed conduct currency interventions – however, it is unknown how much.
However, there is no doubt that the collapse of USD/JPY was due to the intervention of the authorities. The question is different: is it possible to trust the downward momentum of the pair, given the September experience? At the very least, the fact that the bulls regained some of the lost positions on the same day is alarming. Thus, yesterday's low was fixed at 146.22, while the trading day ended at 147.66. It is likely that if it were not for the end of trading, traders would have entered the area of the 148th figure.
Here it is necessary to recall the September events. Immediately after the decline, the USD/JPY pair stabilized, but at the same time, traders did not dare to cross the 146.00 mark for some time (or rather, consolidate around the 146th figure). Market participants expressed very well-founded fears that the Japanese authorities may repeat the intervention if the pair approaches the 147.00 target.
It is likely that this time the market will react to the current situation in a similar way. Only now the "red line" will be 150.00 – again, only for a certain period of time. The discrepancy between the super-soft monetary policy of the Bank of Japan and the expectations of the tightening of the Federal Reserve's monetary policy will continue to push the pair up. Only now a kind of price "ceiling" in the form of the 150th price level will operate.
This assumption is consistent with the USD/JPY technical picture. The daily chart shows that the pair failed to overcome the middle line of the Bollinger Bands indicator within the framework of the downward movement. At the same time, the upper line of this indicator just corresponds to the level of 150.20. Apparently, this target will serve as the upper limit of the price range within which the pair will be traded in the medium term. The lower boundary of this echelon will be the middle line of Bollinger Bands on D1, which corresponds to 146.50.