USD/JPY Volatility Unleashed as Intervention Risk Dominates Market

USD/JPY volatility finally broke free from its months-long suppression last week, culminating in what appears to have been a coordinated intervention episode involving Japan's Ministry of Finance and the US Treasury. The sharp reversal has left market participants wondering whether this development will prove sustainable or is just a temporary reprieve.

The Japanese authorities' intervention gamble now rests on the outcome of Friday's US non-farm payrolls report, which could determine whether the recent price action is a one-off event or marks the beginning of a new trend. The BOJ has been accused of spending a record $140BN to manipulate the yen higher ahead of its disappointing decision.

While the intervention risk will dominate USD/JPY in the early part of the week, fundamentals and technicals are likely to take a backseat beyond that point. Meanwhile, the USD/CAD exchange rate ended July near 1.4015 after falling 1.36% over the month, remaining 2.1% higher for the year.