USD/JPY analysis: key levels to watch after suspected intervention

USD/JPY analysis: technical factors and levels to watch

The trend on the USD/JPY is still arguably bullish, despite the suspected intervention from the Japanese finance ministry. I say “suspected” because they haven’t confirmed it. Well, nothing else would have caused such a big move, would it? So, it's got to be intervention from them.

Anyway, the USD/JPY is going to remain quite volatile. Watch out for further intervention. We now know where the line in the sand is for the Japanese authorities. It's at 160.00 or thereabouts. Previously, analysts were thinking it's at 155.00. Incidentally, the latter has now turned into short-term support, and we have seen a big reaction from this level on a couple of occasions already today.

Source: TradingView.com

Moving forward, if we see a recovery in the USD/JPY, do watch out for further big reaction at around the 160.00 level again, should we get there at some point later in the week.

Ahead of 160.00, though, there is another important level that needs to be monitored closely.

On Friday, you may recall that the USD/JPY dropped aggressively at around 8:00am London time, and that looked like the initial round of intervention from the Japanese authorities, although there wasn't any confirmation of that. Friday’s post BOJ-high prior to that drop was around 156.82.

Interestingly, that 156.82 level has served as an important intraday zone during much of Monday’s session. After the USD/JPY bounced off the 155.00 support level on a couple of occasions, rates were consolidating at around that 156.82 at the time of writing. Earlier during the early European trade, the USD/JPY had failed to hold above this level, which then paved the way for a drop to below 155.00 before it bounced again.  

So, 156.82 is going to be a pivotal level in the next couple of days, and I wouldn’t be surprised if this now turns into resistance on any recovery attempts. 

Meanwhile, a decisive break below the 155.00 support level is still needed to tip the balance in the bears’ favour, who now look like have the BOJ to provide a backstop on any adverse yen movements.