Market update: Japan's finance chief Suzuki on alert as yen declines

Japanese finance minister Suzuki aims to be ‘fully prepared’ regarding FX moves

An index tracking the Japanese yen's performance showed a widespread drop against a mix of major currencies, marking a rough start to the week for the currency. This dip prompted a reaction from Japanese Finance Minister Shun'ichi Suzuki, who stated his intention to be "fully prepared" for forex market fluctuations, emphasising the government's vigilant eye on currency movements.

Previously, Japan’s former currency official Watanabe mentioned that authorities are more likely to consider FX intervention at a level of 155.00 on USD/JPY. Officials have mentioned many times that they are not targeting specific levels, but instead monitor undesirable, volatile moves (depreciation).

Japanese yen index (equal weighting of GBP/JPY, USD/JPY, EUR/JPY and AUD/JPY)

USD/JPY continues into the danger zone, approaching crucial 155.00 level

USD/JPY accelerated closer to the 155.00 level at the start of the week as the dollar remains at elevated levels. 152.00 was initially the line that the market dared not cross, but the high-flying greenback pushed the boundary until markets felt comfortable above the 152.00.

Traders appear to have become emboldened by the lack of urgency in communication out of Tokyo and continue to bid the pair higher still. The RSI reveals that the pair trades well within overbought territory and shows few to no signs of moderating.

Long trades from here present an unfavourable risk-to-reward ratio, considering the warning issued by the former currency official Watanabe about 155.00 potentially being the tripwire for a major response (FX intervention). 155.00 appears as stern resistance with 152.00 and 150 representing levels that could come into plat at a moment’s notice if Tokyo feels it is necessary to take action. Thereafter, 146.50 comes into view.

USD/JPY daily chart

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