Japanese Yen spikes after breaching 150

The Japanese yen is unchanged on Wednesday, trading at 149.05 in the European session. This calmness is deceptive, however, as the yen had a massive spike on Tuesday after it breached the key 150 level.

Did BoJ intervene?

The Bank of Japan won’t win any awards for transparency and has a knack of making significant moves that catch the market off guard. I can understand the thinking behind this, as the BoJ plays a cat-and-mouse game with speculators, and surprise moves that dramatically move the exchange rate help flush out these unwanted market players.

USD/JPY posted a massive spike on Tuesday, swinging some 250 pips in a matter of minutes. Was this due to currency intervention by the BoJ? Perhaps, but the downswing could also be a technical move, such as a stop once the yen breached the 150 line.

True to form, the Ministry of Finance’s (MOF) top currency official has stayed mum and won’t comment on whether the BoJ intervened. Tokyo is always happy to keep traders on edge and discourage speculators. If the spike was indeed caused by intervention, the effect was short-lasting, as the dollar quickly pared its losses and is currently trading around the 149 line, after the spike pushed the yen as high as 147.33. The yen may have steadied for now, but I would not be surprised to see further volatility, as every comment coming out of the MOF and the BoJ will be closely monitored.

Overshadowed by the possible BoJ intervention in the currency markets was the central bank’s emergency bond purchase earlier today. The move has failed to dampen yields on 10-year yields of Japanese government bonds, which have risen to 0.80% today, the highest level since 2013.

USD/JPY technical

• USD/JPY is putting pressure on resistance at 149.10. Above, there is support at 149.97.

• There is support at 148.50 and 147.63.