FX Market Timing Trumps Conviction in Yen, Dollar, and Sterling

The foreign exchange market is unpredictable and rarely rewards conviction for its own sake. Timing is more crucial than being right, especially when it comes to the yen, dollar, and sterling.

The Japanese intervention story has evolved beyond Tokyo's familiar routine. Japan appears to have intervened aggressively, with reported US rate checks and subsequent involvement adding weight to the operation. This matters because traders had grown comfortable with the old intervention cycle: USD/JPY would rise, officials would complain, the market would mostly ignore them, and Tokyo would eventually sell yen, causing the currency to rally.

However, this assumption is now more dangerous due to US involvement. The next push higher in USD/JPY may be met by official resistance from both Japan and the US, making traders more cautious about buying fresh highs despite attractive carry.