USD/JPY extends post-intervention rebound
USD/JPY analysis
USD/JPY experienced two sharp declines over the last two weeks, pointing to likely intervention by Japanese authorities to support the yen. If confirmed, this would have been the first time authorities stepped in since 2024. But as those episodes showed, the impact tends to be short-lived, ultimately failing to prevent new highs.
The fundamental outlook remains negative for the yen. The Japanese economy faces headwinds as it is particularly exposed to the Middle East conflict, importing most of its oil from the region. These growth risks complicate the central bank's tightening path and could lead to pressure for additional fiscal spending, just as this year's budget reached new records. This keeps fuelling concerns over the country's public finances, eroding yen confidence against broader currency debasement trends.
Furthermore, geopolitical uncertainty persists as a US-Iran deal remains elusive, benefiting the USDOLLAR. The greenback also derives strength from accelerating and broadening inflationary pressures, evident in this week's CPI and PPI reports showed. Elevated price pressures support Fed higher-for-longer prospects and are reviving rate hike bets.
Against this favourable backdrop, USD/JPY extends its post-intervention rebound, moving back above the EMA200 and reinstating the bullish bias, putting the pair back on track for new multi-decade highs. However, the RSI points to overbought conditions while FX intervention risks persist, which could cap the upside and lead to fresh pressure.
The monetary policy dynamics work against the pair. The Fed has adopted a holding stance, but the new Chair could be more inclined to resume easing. Meanwhile, the Bank of Japan is already on a tightening path and the next hike could come as soon as the June meeting. With energy prices remaining elevated and real wages on the rise, policymakers may have little room to hold.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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