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USD/JPY slides back as yen intervention giveback accelerates

The yen has already recouped more than four yen of a nine-yen engineered move, with the next test likely coming after the US CPI release on Wednesday.

Reported · Written up by our desk · Major Pairs

USD/JPY was trading just below 159.50 on Tuesday, largely unchanged over the session and confined within a roughly 47-pip range, according to FXStreet. The pair sat between a reclaimed 200-day moving average near 158.00 and a declining 50-day around 160.50.

The latest drop followed a record intervention carried out across July 30 and July 31, but a little over half of what the operation delivered has already been reversed. FXStreet said the market has given back more than four yen out of the nine-yen move, bringing the pair back above the 200-day moving average and near the 160.00 level.

The next direction may hinge on the upcoming US inflation print, with FXStreet noting that Wednesday's American CPI could reopen the distance toward the levels targeted by the intervention. FXStreet added that the pre-intervention peak was just under 164.00, while the post-intervention low came near 155.00, after intervention bought yen using 8.45 trillion yen in one session and about 5.3 trillion yen the following day.

FXStreet also linked the yen-selling pressure to interest-rate differences, citing Japan's policy rate of 1.00% versus an American upper bound of 3.75%. It said the Bank of Japan left settings unchanged the week of the intervention and that futures put the odds of a next increase slightly above even, while Japanese household spending fell 3.3% in June versus expectations of a 1.0% rise.

Latest closeUSD/JPY 159.29 ▲0.9%

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