USD/JPY at 12-month high: government intervention in view?

USD/JPY surged to a 12-month high at 151.7 on the final hours of October, prompting Japan's foreign exchange chief to offer verbal support.

USD/JPY experiences a tumultuous week

Despite being only halfway through the week, the Japanese yen has already taken investors on a rollercoaster ride in a full cycle of ups and downs.

On Monday, Nikkei, a well-known Japanese news group, reported that the Japanese central bank was considering scrapping its yield-curve control policy in the Tuesday meeting, a significant step away from its ultra-loose monetary policy. This move had great potential to strengthen the weakening yen which is trading versus greenback at its lowest level since 1990. The news immediately sent the Japanese yen to a two-week high.

However, the news did not materialize in the announcement made on the following day's Bank of Japan meeting.

Although the Bank of Japan did relax its grip on bond yields and raised its inflation projection for 2024, moves that can be seen as shaking the ground of its ultra-loose monetary policy. However, the message came out of the central bank’s meeting notably fell short of investors' expectations for a much clearer pivot signal. As a result, the Japanese yen tumbled in the hours following Tuesday's after meeting annoucement, with USD/JPY surging as much as 1.5%, marking the biggest one-day movement since April.

Then comes the third consecutive day of volatility, which started with Japan's chief currency official Masato Kanda stating that authorities are still on standby, ready to intervene if necessary. While the yen strengthened slightly from the bottom of the year, the USD/JPY exchange rate stabilized above 151.

At the time of writing, the rollercoaster ride of USD/JPY is showing no signs of stopping as we head into the busiest chapter of the week with the FOMC meeting and the US job report that are both set to shake up the FX market with no hesitation.

USD/JPY technical analysis

From a technical standpoint, as seen in the USD/JPY daily chart below, after surging 16% so far this year, there is notable short-term resistance at 151.536, stemming from the October 2022 peak and the ceiling formed by peaks from July. A breach of this level could send the pair above 152, a level last seen in June 1990.

On the other hand, based on the RSI curve, a near-term pullback potentially triggered by its overbought status could find support at 150, where the 20-day moving average currently resides.