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The USD/JPY traded weaker in September as the action by the U.S. Federal Reserve to stimulate the economy weakened the Greenback versus the Japanese Yen despite attempts by the Japanese government to reduce the value of the Yen by threatening another round of intervention.
Last month’s weakness brought the currency pair closer to the February 1 bottom at 76.02 and the October 31, 2011 bottom at 75.57. As the USD/JPY approaches these levels, traders should look for more talk from the Japanese government to stop the slide. This is known as verbal intervention. If it doesn’t help to weaken the Yen then watch for an actual intervention. This action would send the USD/JPY soaring.
Last month the USD/JPY established support on a trendline at 78.566 this month. Regaining another trendline at 81.566 would be a sign of strength. Based on the short-term range of 75.566 to 84.173, the 50% price of this range is at 79.87. This price is likely to act as a pivot.
Because of the length of the break from 94.98, the down trendline at 80.48 is the most important price level this month. A breakout over this price is likely to trigger a substantial move to the upside.
In summary, the closer the market gets to the former bottoms at 76.02 to 75.57, the more likely the Japanese Yen will intervene. If the intervention is large enough, the momentum from the announcement is likely to drive the USD/JPY sharply higher.