JPY: Staying on intervention alert

Key points:

• Event risk from NFP and thin market liquidity are key reasons to stay on another intervention alert on JPY.
• There is also no major US data next week, which could mean any resulting yen strength could be more sustainable.
• Scope for USDJPY to sub-150 levels.

JPY traders – here are four reasons to stay on intervention alert:

• Previous interventions this week occurred following major events.
  • The first intervention took place after the Bank of Japan's meeting last Friday and was executed during Monday's Asia session.
  • The second intervention followed the FOMC meeting and occurred late in the New York session.
  • Today, another significant event is on the horizon: the release of key US NFP jobs data. This event does not necessarily have to bring a hawkish surprise for an intervention to occur, as evidenced by the intervention that followed the Fed's meeting, which was not a hawkish surprise.
• Both interventions this week occurred during periods of low liquidity, as this gives Japanese authorities more bang for their buck.
  • The first intervention happened on Monday when Japan was on holiday.
  • The second intervention took place late in the New York session when liquidity was very thin.
  • Japan is currently observing a four-day weekend, which could affect market liquidity.
  • China markets are also closed and return on Monday.
• There is no major data expected from the US next week, which could mean limited upside for yields and a more sustained strengthening of the yen. Next key data, April CPI is only due on May 15.
• BOJ officials haven’t officially confirmed the intervention, suggesting it may not be over yet.

Key levels

Support at 150.80 being tested currently. Break below will expose the 150-handle. Another round of intervention could bring USDJPY closer to 149.