Selling USDJPY on high probability of Bank of Japan interventions

27 March 2024 42
Selling USDJPY on high probability of Bank of Japan interventions

The USDJPY currency pair edged towards the 152 mark, that many experts consider the red zone for the central bank's interventions.

Tokyo authorities have spent 9.2 trillion yen ($60.6 billion) three times in 2022 to prop up the yen, each time insisting they are not defending any particular level of the currency.


Previously, Japan's monetary authorities stepped in at 151.94 USDJPY in October 2022.


Finance Minister Shunichi Suzuki stepped up hints of possible actions by the Bank of Japan to strengthen the Japanese currency and push USDJPY lower.


"We are closely monitoring market movements," Suzuki said. "We will take bold measures against excessive moves, including all possible options."


Mention of bold measures is usually interpreted as direct intervention in the currency market.

The Bank of Japan's board member Naoki Tamura confirmed the outlook regarding further policy tightening, saying that the central bank should "move slowly but steadily towards policy normalization".


Investors expect the interest rate differential between Japan and other developed economies, especially the U.S., to remain wide even after the Bank of Japan ended the world's latest negative interest rate regime last week.


The Bank of Japan's board member Naoki Tamura said the way monetary policy is managed will be extremely important for a slow, steady normalization that will put an end to extremely large-scale easing.


Bank of America experts believe that a risk of intervention will increase if the USDJPY pair reaches the range from 152 to 155. A Bloomberg survey of economists showed that an average estimate of the yen level, which would push the Ministry of Finance to intervention, is 155.


The final recommendation is to sell USDJPY if the pair rises above 152.

 

Profit should be taken at the level of 147.00.

A stop-loss should be set at the level of 155.00.

 

This content is for informational purposes only and is not intended to be investing advice.

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