USDJPY – Will the BoJ Intervene?

In 2022, it was believed that the Bank of Japan (BoJ) intervened three times, in September when the USDJPY was at 145.80, and in October and November when the USDJPY was at the 151.50 and 146.50 price levels respectively. For each of the 3 interventions, the USDJPY reversed strongly by more than 500pips.

With the recent steady climb in the USDJPY in August, rising from 138 to the high of 146.50, there have been increasing comments from members of the BoJ and Japanese government regarding the need for an intervention. The BoJ has avoided interventions, possible for the interim, by announcing increased flexibility on its yield-curve control (YCC). However, the markets viewed the action as insufficient and the stronger DXY continued to take the USDJPY higher.

Continued upside on the USDJPY cannot be ruled out, especially if the DXY continues to strengthen significantly. However, if the USDJPY continues to trade between the 145 and 146.50 price range, the possibility for an intervention from the BoJ increases.

For an impactful intervention, the scale and timing of the decision would not be scheduled. A signal would be based on price volatility, in this case, if the USDJPY breaks through the bullish Ichimoku cloud and down from the 145-round number support level, which aligns with the 23.6% Fibonacci retracement level. A reversal of 500 pips, similar to previous interventions, could see the USDJPY retest the trendline, along the 140 price level, with interim support at the 61.8% Fibonacci retracement and 141.60 price level.