The Japanese Yen Approaches a Critical Turning Point

USDJPY Is Approaching the Main Trendline Resistance of the Pattern While Markets Anticipate Another Possible Japanese Intervention

USDJPY Returned Above 160 but Struggled to Break Higher Aggressively

Following the strong U.S. Non-Farm Payrolls report on Friday, USDJPY moved back above the 160 level once again. However, despite the rally, the market struggled to produce a strong and convincing breakout above this major psychological and political resistance zone.

From a technical perspective, price is now approaching the main upper trendline resistance of the current pattern on the daily chart, an area that previously acted as a major turning point for USDJPY.

In our view, this is one of the most sensitive and important technical zones currently visible in the currency market.

Japan Continues to Warn About Excessive Currency Volatility

On Friday, Japan’s Finance Minister once again warned that the government stands ready to respond if excessive volatility continues in the foreign exchange market.

According to her statement:

“We are closely watching FX moves with a strong sense of urgency and will respond appropriately against excessive volatility.”

For markets, the message is very clear. Japan remains on high alert around the 160 area, and the possibility of another intervention remains firmly on the table.

What Happened After the 2022 and 2024 Interventions

One of the most important historical observations is that both in 2022 and in 2024, the first sharp red candle caused by Japanese intervention did not immediately trigger a major collapse in USDJPY.

In fact, the opposite happened.

After the initial decline, USDJPY recovered, pushed to a new higher high above the previous peak, and only afterward did the real collapse begin, with the Japanese yen strengthening aggressively.

For that reason, the market returning above 160 does not necessarily mean the intervention failed. It may simply be following the same pattern seen during previous intervention cycles.

The Two Main Scenarios We Currently See

At this stage, we see two possible scenarios developing.

The first scenario is that the market has already reached an extreme exhaustion zone, and USDJPY could begin falling directly from current levels toward 155 and potentially even 145 later on.

The second scenario is that price first pushes to another higher high in the 161–165 region, similar to the behavior seen after previous Japanese interventions, and only afterward experiences a much larger collapse alongside significant yen strengthening.

In such a scenario, markets may finally begin to feel the full impact of the approximately $73 billion already injected into the FX market by Japan.

In addition, another Japanese intervention remains a very realistic possibility from current levels or even sometime during this week, especially if volatility accelerates and USDJPY attempts to break aggressively above 160.

Why the 160 Level Is So Important for Japan

At this stage, the 160 level has become far more than a normal technical resistance level.

It represents a major political and economic line for the Japanese government, especially after deploying enormous sums in an attempt to defend the yen.

The longer USDJPY remains above 160, the greater the pressure on Japan’s Ministry of Finance and the Bank of Japan to respond more aggressively.

Disclaimer

The information in this article reflects personal opinions and market analysis only and does not constitute investment advice, investment marketing, or a recommendation to perform any financial transaction. All market activity involves risk and is the sole responsibility of the individual investor.