Japanese Yen traders have experienced highly volatile days characterized by sharp selloffs and FX interventions. USDJPY has been in the spotlight as it appears that most of the interventions have targeted this pair, causing the dollar index to fall every time it happens. However, EURJPY has also been significantly affected.
Last month, we discussed the consolidation just above 160. This consolidation was broken, and after a pullback, EURJPY surged. USDJPY reached 160 and EURJPY reached 170 with the recent surge, followed by unconfirmed but rather obvious and expected intervention. Japan’s top currency diplomat, Kanda, did not comment on whether an intervention had occurred or not.
(EURJPY Daily Chart)
After two unconfirmed interventions this week, EURJPY fell to its former resistance at 165 and is now using it as support. On the fundamental side, EURJPY’s upward pressure seems to be easing in the last few weeks, but much of the pressure may not yet be fully priced in. However, the JPY appears weaker against the dollar, which supports EURJPY to a lesser degree.
The uptrend continues, and if the 165 support continues to hold, barring temporary intervention effects, the trend will likely resume in the coming weeks. However, if 165 breaks, the probability of a correction towards 160 will increase significantly. So far, sharp selloffs have created buying opportunities. As history has shown multiple times, no central bank can fight the fundamentals and market indefinitely. Ultimately, the price will settle where it needs to be.
