Japan Monitoring FX Moves

The Japanese Yen is strengthening today on the back of verbal interventions earlier this morning from key figures. Japanese finance minister Suzuki warned that the government is monitoring FX markets with a sense of urgency and will respond appropriately to any excessive moves. These comments echoed those of another Japanese government member, Kanda.

Kanda, Japan’s top FX diplomat, warned that the government stands ready to intervene should FX moves become excessive. He advised that the FX market should fluctuate steadily in line with fundamentals and warned that, should moves become excessive, no options will be ruled out in terms of intervention.

Central Bank Divergence

JPY has undergone a fresh wave of depreciation over recent weeks, driven by the growing divergence between the BOJ and the monetary policy of other central banks. Hawkish market expectations towards the Fed, BOE and ECB, for example, are stark odds with the dovish expectations held towards the BOJ. While this remains the case, JPY looks vulnerable to further downside near-term.

Japanese CPI On Watch

Looking ahead this week, the latest Japanese CPI data due tomorrow will be closely watched. Should we see any further cooling, this will no doubt drive this divergence in market expectations further, pulling JPY lower near-term.

Technical Views

USDJPY

The rally in USDJPY has seen the pair breaking out above the 142.21 level. Price is now testing the bull channel top, where it is currently stalled. However, while above 142.21 and with momentum studies bullish, the focus is on a push higher towards 145 next.