Yen Strength Fueled by Hawkish Rate Hike Expectations
The USD/JPY has experienced a sharp decline, losing around 300 pips from its overnight highs. This drop is attributed to suspected BoJ intervention and expectations of a hawkish rate hike, which have lifted the yen across the board.
The price action has been smooth, with little evidence of any further intervention. A rate check remains a plausible explanation for the move, but this doesn't account for the orderly decline.
Markets are now pricing around 49bp of tightening by year-end, up from 22bp before the late-July intervention episode. Some chatter suggests the BoJ could even deliver a 50 bp hike at its September 18 meeting.
The USD/JPY's broader trend is turning bearish, with a potential lower low forming if the 155.00 handle breaks. This would strengthen the bearish technical forecast and potentially lead to follow-up selling towards 154.00 and then 153.00.