USD/JPY stays volatile after Japan’s FX intervention: What Next?

USD/JPY rebounded to near the 158 zone on Tuesday as the impact of last week’s yen intervention faded. Renewed geopolitical tensions, US dollar strength, and mixed comments from Federal Reserve policymakers have also contributed to the pair’s upward momentum.

USD/JPY Drops 500 Pips on BoJ Intervention

USD/JPY fell sharply by over 500 pips to around 155.60 on Thursday, April 30, following suspected intervention by Japanese monetary authorities. While officials have not officially confirmed any actions taken, reports indicate that Tokyo may have spent nearly $35 billion to support the yen. This intervention move occurred after USD/JPY had surged to a 21-month high exceeding 160.45.

Following the sharp decline, USD/JPY steadily regained momentum, rising above 157. The recovery has been supported by renewed dollar strength, a narrowing US–Japan yield gap, and ongoing geopolitical concerns. Additionally, with Japan observing Golden Week and markets closed until Thursday, thin holiday liquidity has further weakened the yen.

Looking Ahead

The sustainability of gains in USD/JPY over the coming days will largely depend on the performance of the US dollar. The key event for the pair this week is the release of the US employment report on Friday. A softer-than-expected jobs print could provide the catalyst for yen bulls to return with conviction. Traders should also monitor the yen’s reaction to the current risk-off environment and any further signals from the Bank of Japan regarding monetary policy.

USD/JPY Technical Outlook

USD/JPY continues its recovery after finding support below 156 and currently trades above 157.70. From a technical perspective, as long as the pair remains above the 100-day Simple Moving Average (SMA), further short-term gains are possible, with the next resistance at the 20/50-day moving average zone of 158.60/70. On the downside, immediate support is seen at the 157.30/00 area, with further demand expected around 156 and 155.60/50, which serve as crucial support levels.

Note: Despite the turnaround, history implies that implied volatility for the yen will remain high, particularly on moves toward the 160 level. As a result, the possibility of another official intervention effectively limits the pair's potential gain in the short run.

 

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