Bulls start to lose traction on approach to 145, possible intervention trigger

USDJPY hit new highest since Nov 10 in early European trading on Thursday (144.69), approaching significant 145 level, above which the Bank of Japan signaled it may intervene to support its weakening currency.

Yen remains under increased pressure by the wide gap between the monetary policies of Fed and BOJ, as Fed Chair Powell reiterated central bank’s hawkish stance and signaled more rate hikes in his speech on Wednesday, as he does not see inflation hitting 2% target until 2025.

On the other hand, BOJ keeps its dovish stance by maintaining its ultra-low interest rates, but escalated rhetoric about intervention, saying that sharp yen fall prompts authorities to react.

Extended verbal action at the moment looks the most likely, compared to less likely intervention in the market, to buy yen and prevent further fall of the currency and highly unlikely scenario of raising interest rates.

Larger bulls are currently riding on extended wave C of five-wave sequence from 129.64, which faces headwinds at its Fibo 138.2% expansion at 144.56, as strongly overbought daily studies also contribute to pair’s current loss of traction.

Traders also remain cautious of possible intervention, which could quickly change the pair’s direction and harm current long positions.

Weakening bullish momentum on daily chart also signals some corrective action, which is likely to be shallow, as long as Japan officials stick to scenario of verbal intervention.

Broken former pivotal Fibo barrier at 142.50 (61.8% of 151.94/127.22) reverted to support, which should ideally contain dips and keep larger bulls intact.

Res: 144.69; 145.10; 146.10; 147.00
Sup: 144.00; 143.03; 142.50; 141.40