USD/JPY recovers ground after dropping to 34-year lows

The Japanese yen has been on a rollercoaster ride in recent weeks, tumbling to 34-year lows against the US dollar. Will the Bank of Japan step in to prevent further depreciation?

Fueled by speculation of intervention by the Bank of Japan (BOJ), Japan’s top currency diplomat, Masato Kanda, remained tight-lipped on Monday. He refused to confirm or deny whether the BOJ intervened in the foreign exchange market to prop up the yen.

At the time of writing, USD/JPY is seeing some sharp sell-offs that have seen it go from above 160 to around 156 at the time of writing. While some analysts are still attributing this intraday recovery to an undisclosed BOJ move, it remains to be seen whether the current selling pressure will be sustained.

Technical analysis

The 4-hour chart shows a sudden drop that saw USD/JPY tumble from highs of 160 to lows of 154.60 — with the bearish candle settling around the 155.4 support area.

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This sharp decline triggered a pullback in both the stochastic and RSI indicators, which were previously in extremely overbought territory. This movement suggests a potential shift towards a more neutral reading in the near future..

Market attention remains intensely focused on the BOJ as USD/JPY volatility sparks ongoing speculation. If the BOJ confirms intervention, we could see further downward pressure on the USD/JPY pair, potentially testing the 151 support level. However, silence from the BOJ amid a strengthening US dollar, buoyed by a solid labour market and an expanding manufacturing sector, could lead to another historic surge for USD/JPY, potentially surpassing the 160 mark.

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