The end of negative rates did not alleviate the pressure on the Yen, as USDJPY is approaching a breakout point. Currently, talks of FX intervention are maintaining upward momentum, but pressure is intensifying as downward reactions become increasingly smaller.
(USDJPY Daily Chart)
USDJPY has reached 150 and is now aiming for even higher levels. Previous interventions commenced just above the 150 mark, because of that, there are sufficient sellers in the 152-153 zone stopping further advances so far. The option market pricing distinctly indicates this level as a significant resistance, where bulls and bears will likely determine the outcome of their battle. Nonetheless, the ascending triangle formation that started in the last quarter of 2022 suggests a higher probability of an upward breakout.
(USDJPY 1-H Chart)
In addition to the daily triangle, there’s another ascending triangle formed in a much smaller timeframe, starting in mid-March. These are signs indicating a possible breakout approaching rapidly. USDJPY needs to break above 153, potentially triggering rapid stop-loss actions and significant increases in volatility. However, the story may not end there. After numerous discussions of FX intervention, an actual intervention might occur following this potential breakout. Traders may need to navigate through substantial swings in the short term.
