• USD/JPY 32 year low 150.00 Psychological level is finally reached.
• Potential BOJ Intervention is based on volatility rather than price.
• Has the BoJ ever carried out a stealth intervention?

USD/JPY Basic background

USD/JPY continued its march towards the key psychological level of 150.00 as investors remain wary of possible intervention from the Bank of Japan. Yesterday saw the return of dollar strength as continued hawkish rhetoric from central bank policymakers and inflation concerns continue to weigh on sentiment.

The Bank of Japan (BoJ) announced a bond-buying operation during the Asian session as the 10-year yield jumped above the central bank’s upper limit of 0.25%. The BoJ is under pressure as speculation continues to mount regarding the end of its negative rate policy, which is blamed on continued currency weakness. Governor Kuroda himself has insisted that he will stick to monetary easing as the economy still needs support. The belief is that a change in policy can only happen when Governor Kuroda steps down in April 2023.

Intervention talks have kept markets on edge as Governor Kuroda, Finance Minister Suzuki and Prime Minister Kishida have all made similar comments lately. The rhetoric didn’t change much with Finance Minister Suzuki going on to say that they were watching the markets closely and would react to excessive moves. The BoJ insisted that price levels are not targeted, rather volatility and the pace of the yen’s decline will be the deciding factor.

Following last week’s US CPI print, there were some unusual price moves in the pair that prompted whispers of stealth intervention from the BoJ. While a finance ministry official declined to comment, senior currency official Masato Kanda mentioned stealth intervention as a possible option last month. Stealth intervention is difficult to detect and given Kanda’s comments that the Ministry of Finance may not confirm every intervention carried out by the BoJ, speculation continues to mount. The US Federal Reserve’s continued hawkish rhetoric is unlikely to change anytime soon, adding further pressure as the BoJ heads into its next policy meeting on Oct. 28.

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USD/JPY Daily Chart – October 20, 2022

Source: Trading View

From a technical standpoint, there is little left in the form of recent price action to help chart key levels for the pair. Any pullback in price due to intervention could see a retest of the 1998 high around 147,750 while a deeper correction could find support at the 20 or 50-SMA. Little resistance remains above the psychological level of 150.00, with the next area of ​​resistance around 160.00, adding credence to the need for BoJ intervention.

Key intraday levels worth watching:

Support areas

•147,750

•146,000

• 142,500

Areas of resistance

•150,000

• 160,000

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Written by: Zain Vawda, Markets Editor for DailyFX.com

Contact and follow Zain on Twitter: @zvawda