USD/JPY: Testing the limits of FX intervention – UBS

By FXStreet UBS analyst team pointed out that their bullish USD/JPY view is being challenged by strong negative momentum after the USD/JPY broke below the key support level of 110 last week.

Key Quotes

“Short-sellers have been emboldened after the Wall Street Journal published an article last week, citing Japanese Prime Minister Abe that countries should avoid ‘arbitrary currency intervention.’ Chief Cabinet Minister Suga subsequently clarified that PM Abe’s message was misunderstood and warned that Japan stands ready to intervene in the event of ‘one-sided’ FX moves.”

“Nonetheless, the lack of actual FX intervention thus far suggests that speculators could continue to push the USD/JPY even lower in the very near term, toward the next support levels of 107 and 105.”

“While it is not clear whether the Ministry of Finance will conduct actual FX intervention, the case for further Bank of Japan easing has gained in strength. Japan’s economic data has weakened significantly in recent months. The latest Q1 Tankan survey revealed a sharp deterioration in business sentiment and corporates’ inflation expectations, largely due to the strong appreciation of the yen. The Nikkei manufacturing PMI fell to 49.1 in March, the lowest since February 2013, and Japanese households’ inflation expectations have fallen to …read more

Source:: FX Street