Japan Intervention Likely to Do Nothing to USD/JPY over Long Term

Japan made waves in the international currencies market on Monday in an attempt to sink the value of the Yen. The Bank of Japan has attempted to stifle the strength of the Yen in previous years – albeit unsuccessfully. The U.S. dollar has weakened significantly versus the Japanese Yen (USD/JPY) over the past 12 months, moving from $81.50 to $75.50 (as of Friday's close). The Monday intervention resulted in a rally that saw the pair climb as high $79.53 before quickly tapering off. The USD/JPY had been trading at an intraday low of $75.57 before the announcement was made. The move, from low to high, equates to nearly 400 pips! The initial effect was to be expected, however, just as in past instances, the Yen regained strength almost immediately. Investors, seeing a potential buying opportunity, quickly stepped in and have pushed the pair back to the middle of its intraday trading range – currently sitting at $77.97. There are multiple ascending trend lines which are still intact despite the drastic move, leaving little momentum to continue the Yen's retreat. Should those lines be broken, however, all bets are off. The May and July highs for the USD/JPY create a trend line that currently intersects at $79.50, which just so happens to be the price where the Yen bottomed out. Until that trend line is broken, there is little reason for Yen sellers to enter in mass. The USD/JPY has been consolidating for the past few hours, with $77.757 and $78.34 acting as the intraday support and resistance respectively. A break below or above either of those levels could result in a significant move. USD/JPY – 8 Hour Chart with Trend Lines