JPY Plunging Further

Yen traders are on high alert today as USDJPY continues to breakout to fresh multi-decade highs. The pair has today broken above the prior YTD highs around 155. Japanese authorities have warned recently that they are monitoring markets and will not hesitate to intervene if necessary. The BOJ clarified that it is not so much looking at particular levels as much as what happens in the broader backdrop when FX rates hit those levels, and said that it was watching USDJPY 152 – 156. With price now very close to 156, the risk of intervention is growing.

Market vs BOJ

Japanese authorities last intervened in September 2022 and managed to initiate a sharp correction lower. However, on the back of the BOJ hiking rates last month for the first time since the GFC, speculators are betting that the BOJ is out of options to effectively influence FX rates lower, beyond a short-term reaction. As such, JPY sellers are essentially in a game of chicken with the BOJ and Japanese government here.

BOJ Meeting In Focus

The Bank of Japan meets tonight for its April monetary policy review and the risk if that we see the bank launching fresh hiking measures, potentially accompanied by government action. Japanese chief cabinet secretary Hiyashi said today that the government stands ready to make a full response. Given the backdrop, there is plenty of volatility risk in JPY over the next 24 hours with the BOJ running the risk of a significantly lower Yen if it fails to act.

Technical Views

USDJPY

For now, the pair continues to push higher within the bull channel which has framed the recent rally. Above 154.89 next levels to watch are 156.42 and 158.28. To the downside, 151.81 and the bull channel lows will be key support ahead of 148.98 as a deeper level.