USD/JPY Forex Technical Analysis – Low-Volume, Tight Range Indicates Intervention Risk is Present

The Dollar/Yen is inching higher while hovering just below a 32-year high reached the previous session. Unlike the other currency markets that are garnering support from improving risk sentiment, the trade in the Forex pair has been tentative amid fear of another intervention by Japanese officials.

At 05:55 GMT, the USD/JPY is trading 149.270, up 0.040 or +0.03%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $62.61, down $0.05 or -0.08%.

Traders on Intervention Watch

Dollar/Yen traders remained on high alert for the Ministry of Finance and Bank of Japan to step into the Forex market again, as the currency pair nudges toward the key psychological level at 150. A trade to 145.900 about a month ago spurred the first Yen-buying intervention since 1998.

According to Reuters, Japanese Finance Minister Shunichi Suzuki said on Wednesday that he was checking currency rates “meticulously” and with more frequency.

What to Expect from an Intervention

The price action reflects the fact that intervention risk is present. However, the reaction in the market is likely to be restrained since Japanese officials are not going to be out to change the trend, but rather to shakeout the speculators.

A big round number like 150 is probably a good place to start an intervention, but given the Bank of Japan’s ultra-dovish policy and the Federal Reserve’s extremely hawkish expectations, any correction is likely to be short-term in nature.

There is pent-up demand in the market so any pullback is likely to be bought up quickly.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 149.378 will signal a resumption of the uptrend.

A move through 140.353 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the USD/JPY is currently inside the window of time for a potentially bearish closing price reversal top

Support is lined up at 146.454, 144.866 and 142.594.

Daily Swing Chart Technical Forecast

Trader reaction to 149.230 is likely to determine the direction of the USD/JPY on Wednesday.

Bullish Scenario

A sustained move over 149.230 will indicate the presence of buyers. Taking out the intraday high at 149.417 will indicate the buying is getting stronger. This could lead to a test of the psychological 150 level.

Bearish Scenario

A sustained move under 149.230 will signal the presence of sellers. Taking out a pair of lows at 148.661 and 148.429 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the first major pivot at 146.454.

Side Notes

A close under 149.230 will form a closing price reversal top. This won’t change the main trend to down, but if confirmed, it could trigger the start of a 2 to 3 day correction.