USDJPY Collapses on Fed Rate-Check News
Fed Rate-Check
USDJPY remains weak today, gapping lower at the open, on the back of heavy selling on Friday in response to the Fed rate-check activity. News started coming through around the London close on Friday that the Fed was asking banks in New York about their position sizes in USDJPY, raising speculation that the bank was/is going to intervene. Speculation around potential joint US/Japanese intervention has been back in the spotlight recently following comments from Japanese Fin Min Katayama a few weeks ago signalling the potential for such a move.
Intervention Rumours
There had been early rumours of intervention from Tokyo around the BOJ meeting on Friday morning following the heavy drop lower we saw in USDJPY. However, that move was stalling ahead of joint-intervention chat hitting markets late afternoon Friday. For now, it appears the prospect alone of such a move has been enough to impact USDJPY lower but the question now is whether the move can continue, if such action doesn’t materialise.
FOMC Up Next
Looking ahead this week, focus will now be on the FOMC meeting on Wednesday with Yen bulls hoping for a dovish skew from the Fed to keep USD pressured lower near-term. While no rate change is expected, USD bears will be looking for Powell to keep the prospect of a March rate-cut alive. With current pricing for a cut at around just 15%, there is plenty of room for USD to push lower if Powell fuels a dovish repricing in rate expectations this week.
Technical Views
USDJPY
The reversal lower has seen the pair plunging sharply below the 154.74 level, fast approaching a test of 152 next and the bull channel lows. This will be a key support zone for the market with some demand/profit taking likely seen into the channel lows and the 150 level beneath. Any break lower there will turn focus to 146.81 next.
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