To say the USD-JPY forex pair has been going crazy is an understatement. A combination of cryptic, albeit normal, comments from Japanese officials and wild bond market shifts has given the USD-JPY some astonishingly wild intraday swings.
Cryptic Comments, Policy Walkbacks, and Bond Market Antics
The Japanese Finance Minister played it coy, opting for the classic “no comment” on forex specifics and policy tactics. Meanwhile, an LDP official (Liberal Democratic Party of Japan) hinted earlier that they weren’t mulling intervention, which gave Yen sellers a green light to drive USD-JPY past the 155 mark. Little resistance followed this, seemingly affirming the go-ahead for a bearish Yen.
Attempts to backtrack on these comments suggested a blunder in the earlier “open season” on yen selling. Finance Minister Suzuki later acknowledged the dual-edged sword of a weak yen, emphasizing close monitoring. In other words, more of the same.
Just when you thought it was all about verbal cues, the bond market chimed in. Japan’s five-year yields hit a decade peak right before the Bank of Japan’s (BOJ) policy decision, with hints of potentially fewer bond purchases stirring the pot alongside subdued inflation figures.
Inflation and Data
The BOJ kept interest rates frozen from 0%-0.10%. They even cut some slack on their monthly bond-buying spree, signaling a subtle shift in their monetary stance. Looking ahead, the BOJ has modest expectations with GDP growth and CPI forecasts suggesting a cautious but upward trajectory. Indeed, there’s cautious optimism that the ongoing wage-price feedback loop will eventually nurture a healthy inflation rate that aligns with their 2% target.
Price Action Play-by-Play
The current daily candle’s range is substantial, nearly 281 pips. And unless something dramatic happens between now and the Friday close, the USD-JPY will create a new daily and weekly 34-year high. Here’s a play-by-play of today’s notable price action:
0400 EST—Whether traders were expecting Yen intervention or comments strongly hinting at intervention, selling pressure was heavy. In just five minutes, the USD-JPY moved an astounding -175 pips lower from 156.69 to 154.94.
0715 EST—By this time, the USD-JPY had clawed back most of its losses. Another attempt was made to push the USD-JPY lower, but it was much more muted this time. This swing had a -56 pip drop from 156.82 to 156.26.
0830 EST—Another dip, and again, weaker than the prior drop. This time, there was a -34 pip drop from 156.91 to 156.56.
If one thing is clear, the market is calling Japan’s bluff and saying, “Actions speak louder than words.”
