USDJPY Reverses Losses As Market Bets On Anticipated BOJ Intervention

Summary:
• The USDJPY pair has turned red as traders expect the Bank of Japan to intervene and cushion the yen against potentially-damaging losses.

Japanese yen has made some gains on the US dollar, as the market bets on anticipated intervention by the Bank of Japan (BoJ). USDJPY traded at 150.060, having shed off another -0.36% at 13.12 GMT on Thursday. The pair seems to have lost upside momentum, and could be headed for the first consecutive two-day losses since February 1^st.

Japan’s economy contracted by -0.1% in the fourth quarter of 2023, performing below the projected modest growth rate of +0.2%. Furthermore, the country is on course to lose its position as the world’s third-largest economy to Germany, as a result of a weak yen. While the disappointing GDP figures should have typically led to further losses by the yen, the market expects an intervention by the BOJ to minimize the damage.

BOJ’s NIRP and timing of potential intervention

The BOJ’s long-running negative interest rate policy (NIRP) has seen the yen head toward historic lows of 152. Many analysts believe that the BOJ is likely to pump some dollars into the economy to ease pressure on the Japan’s economy. Furthermore, timing is an important consideration if the bank were to proceed with such an intervention. Therefore, the BOJ will most likely wait for Thursday’s release of US Initial Jobless Claims and Core Retail sales data before entering the market.

The yen is likely to continue rising steadily as we approach the release. Also, higher-than-expected Initial Jobless Claims and lower-than-expected Core Retail Sales data could possibly delay the BOJ intervention, as they would be bearish for the dollar.

Technical Analysis

The momentum on the USDJPY pair lacks upside momentum, as shown by the RSI indicator. Therefore, this will likely favour price action below the 150.40 pivot, with the first support at 149.75. Further control by the sellers will likely push the support further down to 149.50. The bulls will need to sustain upward momentum above 150.40 to break through the first resistance at 150.65. Gains beyond that point are likely to be marginal, going as high as the second resistance at 150.90.

USDJPY 30-minute chart