USD/JPY set for highest weekly close since 1986

I thought we might see some real currency intervention today after Japanese Finance Minister Katayama said he was prepared to take 'decisive action' on speculative moves in the yen.

That comment caused a quick fall to 161.00 from 161.70 but the pair soon rebounded to 161.30 and it's traded there since. If we finish around those levels, today will market the highest weekly close since 1986.

It's a dangerous game buying USD/JPY around these levels given the intervention threats but the market doesn't seem afraid, even going into a weekend. Japan has spent about $73 billion defending the yen so far this year and it hasn't dissuaded the market.

If there's no action up at these levels, the market might take it as a green light to drag USD/JPY to 165.00.

Ultimately, I don't think the weekly closes matter as much as the intraday levels. The Ministry of Finance is likely eyeing 161.99, which was a short-lived high on July 1, 2024. Starting in that month, USD/JPY sank all the way down to 140.00 with the bulk of that coming in five consecutive weeks from the start of July.

I don't see the risk-reward in USD/JPY longs at the moment but it's assuredly fundamentals carrying it and this week's hawkish press conference from Kevin Warsh gave the market ample reasons to buy dollars.

That might have some in Japan watching EUR/JPY. That pair is still within the tight range that it's traded in since November and right in the middle of that range.

Looking ahead, I would expect at minimum to get a barrage of yen-supportive talk in Japan next week. I would be careful to watch at the open of the week but officials also had a chance to intervene in low liquidity today and passed it up. The US is on holiday with stock markets closed.