USDJPY Crosses BoJ Intervention Mark As US Inflation Rate Rises

USDJPY on Wednesday climbed by its highest margin since March 19, as investors took cues from the latest statements by leading Japanese policymakers. Furthermore, higher-than-expected inflation figures strengthened the US dollar as prospects of higher-for-longer interest rates became more apparent. The USDJPY rose to touch the BoJ previous intervention level of 152.00, with the pair up by 0.47% to trade at 152.495 at 12.45 GMT.

The US Core CPI (excluding food and energy prices) rose by 0.4% in March, marching the February figure and exceeding the forecast 0.3%. This led to an annualized Core CPI of 3.8%, higher than the forecast figure of 3.7%. Headline inflation followed the same trajectory, coming in at 3.5% year-over-year and 0.4% month-on-month, beating the forecast figure by 0.1% on each occasion.  With inflation remaining stubbornly above the Fed’s preferred rate of 2%, the dollar is likely to strengthen further as it becomes more likely that the Fed may only announce two rate cuts or less this year.

The Bank of Japan has been intervening verbally each time the USDJPY rate has come near 152.00. The bank last entered the market in October 2022, and that prospect looks more likely, with the pair finally crossing that threshold on Wednesday. Japan is caught in a delicate situation where it has to balance between fighting deflation and returning the economy to the growth path and keeping the yen stable against the US dollar.

BoJ Governor Kazuo Ueda already stated that they will not intervene with an interest rate hike just to support the yen, and that could add to the downward pressure well into the perceived “intervention” territory.

Technical analysis

The upside will prevail on USDJPY if the buyers keep the pair above the 152.35 pivot. That could see the pair break above the 152.52 resistance, which could enable further advances to test 152.70 in extension. However, a move below the pivot mark could see control return to sellers, with support at 152.12. A continuation of that control will likely break the support and potentially see movement further down to 151.90.