USD/JPY extends decline as Yen recovers on intervention fears

The USD/JPY pair fell to 156.13 on Thursday, with the Japanese yen recouping recent losses as markets remain on high alert for potential intervention by Japanese authorities.

Traders are speculating that the US Thanksgiving holiday, which typically sees lower liquidity and thinner market conditions, could provide a strategic "window" for regulators to intervene and support the yen. Notably, the mere risk of intervention is already acting as a deterrent, effectively capping the currency's recent decline.

Fundamentally, sentiment is also shifting as investors reassess the Bank of Japan's (BoJ) policy trajectory. Recent media reports suggest the central bank is actively preparing for a potential rate hike as early as next month. This shift is driven by persistent inflationary pressures, the pass-through effects of a weak yen, and a perceived easing of political pressure to maintain ultra-loose monetary settings.

Externally, the yen has found additional support from a broadly weaker US dollar. Markets have increased bets on further Fed easing, weighing on the greenback across the board.

Technical analysis: USD/JPY

Four-hour chart

On the H4 chart, USD/JPY is forming a consolidation range around 156.40. We anticipate a near-term decline to 154.90, which is likely to be followed by a technical rebound to retest the 156.40 level. A decisive upward breakout above this resistance would open the path for a more significant rally towards 158.47. However, following such a move, we would expect the formation of a new lower high and the start of a fresh downward impulse, targeting 154.00 and potentially extending the correction to 153.30. The MACD indicator supports this bearish medium-term bias. Its signal line is below zero, pointing downward, confirming that selling momentum remains strong.

One-hour chart

On the H1 chart, the pair is developing a clear downward wave structure with an initial target at 154.90. We expect this target to be reached, after which a corrective wave of growth should emerge, retesting the 156.40 level from below. The Stochastic oscillator corroborates this near-term bearish view. Its signal line is below 50 and falling towards 20, indicating that short-term downward momentum remains intact for now.

Conclusion

The yen is strengthening on a confluence of intervention threats and a fundamental reassessment of BoJ policy. Technically, USD/JPY is in a corrective phase with an immediate target at 154.90. While a rebound to 156.40 is expected thereafter, the broader risk is tilted to the downside. A break above 158.47 would be required to invalidate the current bearish corrective structure. Traders should remain vigilant for intervention-driven volatility, particularly during periods of low liquidity.