The Bank of Japan raised its policy rate by 25 basis points and then conducted an FX "rate check" on USD/JPY, a move often read as a precursor to intervention. The pair whipsawed from a high near 158.05 down to 156.67 before steadying, with traders now watching 156.656 and 158.04 as the key levels either side of the range.
BOJ hike arrives softer than expected
The Bank of Japan raised its policy rate by 25 basis points earlier today, a move markets had widely anticipated. But the decision came with two complications: two board members dissented against it, and Governor Ueda's tone was less hawkish than traders had priced in. Markets had expected not just the hike itself but conviction about further tightening to come, and Ueda's commentary didn't deliver that. As a result, USD/JPY moved sharply higher rather than lower, printing a high of 158.05 — just short of the 158.04 resistance level flagged ahead of the decision.
Rate check sends the pair lower
Price initially eased to around 157.75 before the Bank of Japan conducted what's known as a rate check — contacting major banks for current buy/sell quotes on the currency. According to Nikkei, the calls were made late on the 18th and into the 19th, Tokyo time. The practice is often seen as a precursor to intervention, though it can also be a feint, and the report alone was enough to send USD/JPY down to a low of 156.67.
That low landed just above the 50% retracement level at 156.656, measured from the September 2 high down to the September 8 low. Price is currently trading at 156.76, holding just above that support.
Traders watch history and the guardrails ahead
Market participants remember that earlier this year there was intervention late in the day on a Friday, and intervention has also followed BOJ meetings before, so the setup has traders on alert. The US Treasury Secretary dared the market to buy USD/JPY when it was trading at 153.75 last week, and so far he has been wrong; he has said he holds asymmetric information, which could include the size of the cash pile Japan is willing to intervene with.
A break below 156.656 would open the door toward the rising 100-hour moving average and the broken 38.2% retracement level, both near 155.78. Holding support instead would favor a rotation back up toward the 61.8% retracement at 157.536, then a retest of the 158.04 swing area. A confirmed break above 158.04 would put the 200-day moving average at 158.402 in view next.
Sources: Investinglive, Investinglive
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