USDJPY – hawkish BoJ and speculation of another intervention were likely behind today’s sharp fall

USDJPY drops sharply in early US trading on Wednesday (down over 1%) after the pair hit the highest in almost five weeks (160.39) but bulls repeatedly failed to sustain gains above psychological 160 barrier.

The latest hawkish shift from BoJ officials in calling for quick action to support weakening yen in the situation of increasing inflationary risks, adds to growing expectations that the central bank may raise rates as early as this month.

On the other hand, today’s sharp rise of Japanese currency sparked speculation that Japanese authorities have intervened again after repeated attacks at 160 threshold (although the previous intervention started from the levels near 164).

The pair fell to 158.20 on today’s sharp fall (trendline support), with quick bounce above cracked significant support at 158.42 (Fibo 38.2% of 155.22/160.39 rally / 200DMA) suggesting that bears may have reached firmer ground (in case of daily close above 158.42).

The structure on daily chart weakened, as RSI slid below 50 zone and 14-d momentum entered negative territory, developing signal that the price may fall further (sustained break of 158.42 is required to signal bearish continuation) after limited upticks (should be capped under 159.17 (broken Fibo 23.6% / 20DMA).

Traders will continue to focus on comments from Japanese and US financial authorities for fresh signals.

Res: 159.17; 159.35; 159.59; 160.00
Sup: 158.42; 158.05; 157.81; 157.20