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FX Intervention: Are USDJPY Bulls Set for a Prolonged Retreat?
Forex
Technical Analysis
Summary:
Japanese Finance Minister Satsuki Katayama stated that the government stands ready to intervene in the foreign-exchange market to counter excessive one-sided moves, providing the yen with temporary support. Although stealth intervention by Japanese authorities could help the yen rebound, the recovery is unlikely to last long as investors remain cautious about the Bank of Japan(BoJ)'s monetary-policy outlook, the primary driver of the currency's weakness.
Buy
CLOSEDUSDJPY
End Time
155.981
Entry Price
160.000
TP
154.000
SL
156.178 -0.368 -0.24%
313
Points
Profit
154.000
SL
156.294
CLOSING
155.981
Entry Price
160.000
TP
Fundamentals
Japanese Finance Minister Satsuki Katayama said the government stands ready to intervene in the FX market to counter "excessive, one-sided" moves, giving the yen a short-lived lift. Although stealth Ministry of Finance (MoF) bids are expected to slow the currency's slide, the rebound is unlikely to last as investors remain wary of the Bank of Japan's (BoJ) policy trajectory, which is the main driver of yen weakness. A former Policy Board member suggested the BoJ could still deliver three more hikes before Governor Kazuo Ueda's term ends, taking the overnight call rate to 1.5%. The first move to 1.0% is pencilled in for mid-2026, contingent on U.S. growth and Japan's wage-price dynamics.
As the policy rate edges toward the neutral zone, additional tightening will become harder and face push-back from the government's reflationist camp. Tokyo is therefore trying to channel part of the $7 trillion in household financial assets into JGBs, launching new retail bond products and incentive schemes, to offset the BoJ's tapering. Retail JGB sales in FY2025 jumped 30.5% YoY to $5.28 trn, the highest since 2007, helped by rising yields. The MoF has expanded the product slate and is backing a 30-year JGB ETF to lock in individual investors for the long run. Past retail campaigns met with limited success, but the 10-year JGB yield punching through 2%, a 26-year high, and the 30-year yield topping 3% for the first time on record are proving a more compelling lure. With the central bank reducing purchases and banks constrained by capital rules, households are now viewed as the marginal buyer.
Across the Pacific, the dollar is on the back foot as markets price further Fed easing and President Trump tweets for lower borrowing costs. Fed Governor Adriana Kugler told Bloomberg TV that recent data are "consistent with a soft-landing narrative" and warned that withholding rate cuts would raise recession risk. Opposition to a 50 bp move will fade as rates decline. Traders are now looking to Tuesday's advance Q3 GDP print: the consensus is for annualised growth of 3.2%, down from 3.8% in Q2.
Technical Analysis
Daily: The Bollinger bands on USDJPY have contracted and the moving averages have flattened. After last Friday's bullish breakout above the upper Bollinger band, price has spent the past two sessions testing the mid-band, confirming the move. The short-term up-trend has resumed. A sustained hold above 155 should open a fresh test of 158–160. The MACD has printed a golden-cross with the fast-slow lines bouncing off the zero axis, signalling the correction is complete. RSI at 52 reflects a wait-and-see mood. Immediate support sits at 156.10 and 155.
Weekly: The Bollinger bands are widening upward and the moving averages are fanning out, leaving the bullish structure intact. The post-golden-cross MACD has lifted both lines back above zero, while price continues to ride the EMA12 higher classic strength. RSI at 62 shows investors are net buyers.
At this stage, traders are advised looking to buy dips while the prevailing uptrend remains in force.
Trade Recommendations
Trade Direction: Buy
Entry Price: 155.6
Target Price: 160
Stop Loss: 154
Support: 154.7/153.2/150
Resistance Levels: 158/158.8/160
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