USD/JPY Whipsaws as Japanese Officials Are Seen Stalking the Market

US Dollar/Japanese Yen Price and Chart Analysis

• USD/JPY bounces off 145.00.
• Market talk that the BoJ is checking prices.

The Japanese Yen is highly volatile in two-way trade Wednesday on talk the Bank of Japan is ‘closely monitoring’ and ‘checking’ prices in the foreign exchange market. This is normally the step before the central bank actually intervenes in the market and today’s chatter has seen USD/JPY trade in a 2 big figure plus range. Yesterday’s strong performance by the US dollar, on the back of the better-than-expected inflation report, sent USD/JPY back towards 145.00, a level that now looks as though it may be a line in the sand for Japanese officials.

Bank of Japan (BoJ) – Foreign Exchange Market Intervention

The Japanese Yen has been on a downward spiral against the US dollar for many months now, aided by the BoJ’s decision to continue to buy Japanese government bonds (JGBs) in increasingly large amounts. The central bank’s actions to keep longer-dated bond yields capped at 0.25% have started to draw attention from other central banks with the Yen’s weakness aiding Japanese trade.

Japanese Yen (JPY) Collapses Across the Board as the BoJ Ramps up Bond Purchases

USD/JPY reacted sharply today at the 145.00 level, suggesting the BoJ is preparing to defend the rate at, or very near to, this level. While verbal intervention from central bankers is powerful and should not be ignored, there will need to be action shortly otherwise the market may look to call the BoJ’s bluff, and that could see the pair moving towards 150 in short order.

USD/JPY Hourly Price Chart – September 14, 2022

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Retail trader data show22.05% of traders are net-long with the ratio of traders short to long at 3.54 to 1. The number of traders net-long is 12.56% lower than yesterday and 12.70% lower from last week, while the number of traders net-short is 3.81% lower than yesterday and 1.89% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bullish contrarian trading bias.

What is your view on the USD/JPY – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.