USD/JPY subsequently collapsed on official reports of currency interventions

US dollar Price and Diagram Analysis

• USD/JPY trade in a range of 350 points in less than one hour.
• It appears that the Bank of Japan is buying Japanese yen for US dollars.

The Japanese yen is highly volatile in European trade as the market reacts to rumors and later confirmation that the Bank of Japan (BoJ) has intervened in the foreign exchange market by buying yen against US dollars. If the reports are true, and the market seems to be suggesting it is, this is the first time the BOJ has intervened in the market since June 1998.

Bank of Japan (BoJ) – Intervention in the foreign exchange market

Earlier today, the Bank of Japan kept interest rates unchanged at its latest policy meeting, as expected. The Bank of Japan governor said the central bank would not change its ultra-loose monetary policy “for now,” adding that the Bank of Japan would not raise interest rates “for some time.” While the central bank intends to keep rates low (in negative territory) for longer, it appears they are concerned enough about the yen’s weakness to try to shore up the ailing currency. Maybe that USD/JPY 145.00 is the unofficial limit for the central bank. Earlier today, the Bank of Japan’s latest monetary policy decision did not hint at any formal currency intervention, adding to current volatility.

The Japanese yen is falling sharply as the Bank of Japan curbs the threat of currency intervention

USD/JPY has been trading in a 350 pips range so far in Europe, more than double the normal trading range using the 14-day ATR indicator. What has been a one-way trade in recent months – USDJPY higher – now appears to have been stopped in its tracks as the Bank of Japan tries to regain control of its currency.

USD/JPY 5 Minute Price Chart – September 22, 2022

For all market-moving data releases and economic events, watch in real time DailyFX Calendar.

Retail trader data shows that 27.43% of traders are net long with a ratio of short to long traders of 2.65 to 1. The number of net long traders is 15.22% lower than yesterday and 6.16% lower , than last week, while the number of net-short traders is 3.46% lower than yesterday and 2.16% lower than last week.

We generally take a contrarian view on crowd sentiment, and the fact that traders are net short suggests that USD/JPY prices may continue to rise. Traders have even less than yesterday and last week, and the combination of current sentiment and recent changes gives us stronger contrarian trade bias in USD/JPY.

What is your view on USAD/JPY – bullish or bearish?? You can let us know via the form at the end of this piece or contact the author via Twitter @nickcawley1.