USD/JPY recovers from sudden plunge, on Japanese authorities intervention threats

• USD/JPY experienced a significant drop, losing 67 pips rapidly, before stabilizing around 151.52, slightly up by 0.03%.
• Japanese Producer Price Index data showed a contraction, justifying the Bank of Japan’s ultra-loose policy.
• Traders are now focusing on the US CPI data release on Tuesday, which is expected to show a slight moderation in inflation rates.

The USD/JPY paired some of its earlier losses after plunging 67 pips in the last hour to a daily low of 151.20 amid the lack of news and reiterating comments of Japanese authorities that FX moves are undesirable and reflect fundamentals. At the time of writing, the USD/JPY hovers at around 151.52, gaining some 0.03%.

USD/JPY sees a sharp but brief drop, recovers as market digests US inflation expectations and Japanese economic data

The US economic docket released the New York Fed Inflation Expectations survey, with data showing American households estimating inflation for one year at 3.6% in October, below last month’s 3.7%, while for a five-year, dipped to 2.7% from 2.8%. After the data, the US Dollar Index (DXY), a gauge of the buck’s value against a basket of six peers, dropped from 105.77 to 105.69, while Wall Street pares some of its earlier losses.

Federal Reserve Governor Lisa Cook crossed the newswires but failed to provide any monetary policy hints. USD/JPY traders brace for Tuesday's November 14 release of inflation figures, with traders expecting the Consumer Price Index (CPI) at 3.3% YoY from a previous 3.7%, and core CPI at 4.1%, from 4.1%.

Meanwhile, the USD/JPY plunged from around 151.88 daily high toward 151.20 at around 15:01 GMT, with the move halting at around 15:07 GMT at 151.20 as buyers entered the markets, lifting the exchange rate towards the current spot price.

During the Asian session, Japanese data showed that the Producer Price Index contracted 0.4% MoM in October, below estimates of a 0% reading and September’s 0.2% shrinkage. Annually-based data dipped to 0.8% from 2.2% in September.

Following the data, Japan Finance Minister Suzuki said that “sudden Forex moves are undesirable,” adding that “should be determined by fundamentals.”

USD/JPY Price Analysis: Technical outlook

Following a probable intervention, the USD/JPY is forming a ‘spinning top,’ and a ‘double top’ chart pattern could be emerging, though a break of the latest cycle low, seen at 149.18, is crucial to pave the way for a pullback. For that outcome, sellers must step in and drag prices below the Tenkan-Sen at 150.55, followed by the Senkou-Span A and the Kijun-Sen, each at 150.25 and 150.00, respectively. Once cleated, up next would be the 149.00 figure and the November 3 cycle low at 149.18.