Yen-tervention dangers stay in focus to begin the brand new week

Towards the end of last week, USD/JPY offered up some interesting price moves. The currency pair fell in the run up to the US jobs report before some pushing and pulling in holiday-thin trading on Friday. But after settling near unchanged from just before the non-farm payrolls, we’re now seeing the pair run up again from 161.40 to 161.90 levels.

As much as there are other factors driving dollar sentiment and the broader risk mood, intervention risks remain the most influential driver of price action for USD/JPY currently.

The drop on Thursday and Friday was arrested somewhere around 160.70 levels, before dip buyers stepped back in. The sudden drop on Thursday especially was notable as it saw price action fall back below the key hourly moving averages.

That put a more bearish near-term bias in place but is now being reversed again as dip buyers step in to retest the confluence of the 100 (red line) and 200-hour (blue line) moving averages at 161.84-92. A break above that region will see the near-term bias switch to being more bullish again.

After briefly breaching the 2024 highs last week, traders were more guarded in terms of positioning ahead of the US jobs report. But with that now out of the way, is the path clear for another run above the 162.00 level?

There is a good argument for that with the path of least resistance still leaning towards a weaker Japanese yen currency. The only question is, will Tokyo officials step in to try and slow down the bleeding?

The economic calendar this week will not have any major risk events as influential as the non-farm payrolls. As such, traders will be left to their own devices in dictating proceedings. And if they do take a firm run back towards the highs last week near 162.80, that could really invite Japan’s ministry of finance to meddle considering that there is nothing else that could pressure traders into backing off.

It’s all a psychological game at this stage.