Markets Are Yenterventilating - Keep Calm (For Now)
Back at prior yentervention levels on USDJPY. What this means- and how to potentially trade it.
USDJPY 159.93 at session highs - 7 ticks from the 160-handle that had kicked off 2024 yentervention week at end of April - start of May.
And oh boy, are the markets hyperyenterventilating.
So in light of this ¥10 trillion that Japan Ministry of Finance had spent between April 29th - May 2nd to buy a whopping 7 weeks of JPY meltdown pausing, here is my latest commentary on yentervention and currency markets.
My message is simple.
I do not know when or where the next MOF yentervention will be. I have zero* idea. Which puts me right in line with the rest of the world, MOF officials themselves very much included (so, anyone who “has an idea” - let alone “is sure of xyz…” regarding the next phase of yentervention is either lying to themselves, or is unaware that they are unaware).
That said - let me address the asterisk on having “zero* idea” from above.
Technically, I do have a tiny fractional iota of an idea above “zero/no idea” regarding yentervention activity ahead (but we can just round that down to zero). And that is as follows:
While I may not know when and what level MOF will yentervene next, what I can say with near certainty is- I DO know where MOF will NOT yentervene: USDJPY 160 (± a few ticks) - which is where markets and commentary is coalescing around as “the level.” USDJPY 160 is nothing in terms of MOF activity. All else higher is fair game.
I say this for every pre-yentervention period after the first one that Japan very stupidly, irresponsibly and regrettably fired off in September ‘22.
MOF will not act to yentervene at/in defense of the same levels that they had acted previously. And this is not despite broad market consensus believing and behaving as though MOF will re-act upon those same prior levels each time (be it USDJPY 146, 152, or now 160), but MOF will not act to yentervene at those same levels because markets believe that’s where MOF will take action. What’s more - because markets behave as though the prevailing prior yentervened level is where the next one will also be- they make it a self-fulfilling market reality, temporary as it may be, which then allows for MOF to not need to act at that level.
I will elaborate further on this below - but first, we need an update on the broader state of green and red blinking tickers as it relates to JPY for proper context.
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