Japan will be on the defensive when the foreign exchange market opens next week

USD/JPY is up 20 pips today and trading at 145.30.

In all likelihood, this will be the highest close in 20 years for USD/JPY and is the highest intraday trade since they came in at 145.90.

The Ministry of Finance could be in a hurry to intervene again. The problem is that they are fighting a fundamental battle. The US Dollar is strengthening across the board on the back of a strong Nonfarm Payrolls report. The market is beginning to wonder if the Fed’s hike to just under 5% will be enough to bring inflation under control.

The Department of Finance has often emphasized “volatility” rather than absolute price levels in its speeches and interventions. We’ve been around 144.00 for a month so the one way moves have certainly been tamed.

But if they allow the pair to make new highs, I suspect the market will quickly test 150.00. Domestically, the economic calendar is very light for Japan next week.


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