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The market is warming up for the week and we already have some big moves indicated. Australia is on holiday today but the big notable change is that USD/JPY contionues to sink. The pair rose as high as 159.23 on Friday in the aftermath of the BOJ but it’s now down nearly 500 pips from that level, including 123 today.Net change:Euro: 1.1864 change since Friday’s close +0.0038Japanese Yen: 154.48 change since Friday’s close −1.23British Pound: 1.3650 change since Friday’s close +0.0009Swiss Franc: 0.7753 change since Friday’s close−0.0048Canadian Dollar: 1.3700 change since Friday’s close 0.0000Australian Dollar: 0.6913 change since Friday’s close +0.0020New Zealand Dollar: 0.5958 change since Friday’s close +0.0009Note that liquidity is still extremely thin so be careful with these numbers.On Friday, the Bank of Japan decision wasn’t any big surprise but several reports/rumors suggest that the Federal Reserve did a rate check on USD/JPY on behalf of the BOJ/Japanese Ministry of Finance. That’s a big warning about potential intervention. In addition, on the weekend Japan PM Sanae Takaichi warned officials stand ready to act against
“speculative and highly abnormal” market moves as the yen weakens and
bond yields rise.Officials appear to be escalating from verbal warnings to operational
signalling, increasing intervention risk into thin-liquidity sessions and the market is taking heed. USD/JPY longs and yen shorts in general have been a popular and increasingly crowded trade over the past eight months and it looks like a race to the exits that’s continuing in early trade.The comments from Takaichi were made during the leaders’ debates and an election is coming in February. There’s no doubt she doesn’t want markets (including the bond market) to get disorderly during the campaign so that heights the risk of intervention. At the same time, she’s campaigned on more fiscal spending and you can’t fool the bond market forever.
This article was written by Adam Button at investinglive.com.
💡 DMK Insight
USD/JPY’s drop from Friday’s high of 159.23 signals a potential shift in market sentiment. With Australia on holiday, liquidity might be thinner, amplifying price movements. Traders should watch for support levels around 157.50, which could act as a pivot point. If the pair breaks below this level, it could trigger further selling pressure, especially with the ongoing uncertainty surrounding the Bank of Japan’s policies. This shift could also impact correlated assets like Japanese equities and commodities priced in yen. Keep an eye on the broader economic indicators, especially U.S. inflation data, as they could influence the USD’s strength against the yen in the coming days.
📮 Takeaway
Watch for USD/JPY to hold above 157.50; a break below could lead to increased selling pressure.
