Japanese Yen steadies as intervention risks keep traders cautious

• USD/JPY trades around 157.40 on Tuesday, virtually unchanged on the day.
• Japanese authorities step up warnings over Japanese Yen weakness, keeping the risk of intervention alive.
• Expectations of further interest-rate hikes from the Federal Reserve provide support to the US Dollar.

USD/JPY trades around 157.40 on Tuesday at the time of writing, virtually unchanged on the day. The pair remains caught between support for the US Dollar (USD) from expectations of further monetary tightening in the United States (US) and investor caution over the risk of Japanese authorities intervening to support the Japanese Yen (JPY).

Japanese Finance Minister Satsuki Katayama stepped up Tokyo's warnings over the currency's performance on Tuesday. She said that an undervalued Japanese Yen generally poses problems and indicated that she agreed with US Treasury Secretary Scott Bessent to strengthen cooperation between the two countries during their September 25 talks.

Katayama also said that Japan will continue to communicate closely with the US Treasury to ensure orderly conditions in the foreign exchange market. Her comments reinforce investor caution following a series of recent warnings from Japanese authorities over the weakness of their currency.

Japan's top currency diplomat, Atsushi Mimura, had already said on Monday that markets should take seriously the "very clear" message from Tokyo and Washington regarding Japanese Yen depreciation. The prospect of coordinated action between the two countries is therefore helping to limit gains in USD/JPY.

Markets are also awaiting data from Japan's Ministry of Finance, due on Wednesday, which will reveal the amount of any currency intervention conducted between August 27 and September 28. The figures could notably indicate whether the rate check reported on September 18 was followed by actual Japanese Yen purchases.

On the monetary policy front, the JPY is also benefiting from the tightening cycle initiated by the Bank of Japan (BoJ), which raised its policy rate to 1.25% on September 18. Investors now turn their attention to upcoming Japanese data, including the Tankan survey and Tokyo Consumer Price Index (CPI), for further clues about the possibility of additional rate hikes.

However, USD/JPY remains supported by elevated US yields and expectations of further interest-rate increases from the Federal Reserve (Fed). According to the CME FedWatch tool, markets see around a 70% chance of a 25-basis-point rate hike at the October meeting, following the rate increase delivered in September.

The tug of war between pressure from Japanese authorities to curb Japanese Yen weakness and support for the US Dollar from expectations of elevated US interest rates therefore keeps USD/JPY relatively stable around 157.40 on Tuesday.

Japan signals readiness to defend Yen as BoJ hike pace accelerates

Analysts at MUFG note that recent rhetoric from policymakers has grown more forceful, with comments at the start of this week continuing to send “a strong signal that Japan is prepared to intervene … to support the yen.” They add that officials are “encouraging speculation that Japan will also make other policy adjustments to provide more support for the yen such [as] speeding up the pace of BoJ rate hikes under pressure from the US.”

MUFG highlights that “the BoJ has already sped up the pace of hikes this month (every three months) and signalled that a faster pace of hikes is likely to continue heading into year end.” The bank expects “the next hike to be delivered in December,” while noting that “the Japanese rate market is attaching a higher-than-normal probability (~36%) to a back-to-back hike next month.” According to MUFG, these latest developments are “helping to cap further upside for USD/JPY even as the US Dollar strengthens broadly.”

USD/JPY technical analysis

In the one-hour chart, USD/JPY trades at 157.38, retaining a mildly bearish near-term bias as it holds beneath both the 200-period simple moving average (SMA) at 157.43 and the 100-period SMA at 157.89. The pair remains capped by this layered moving-average supply, while the Relative Strength Index (14) around 48.46 is close to neutral, hinting at a consolidative tone rather than impulsive selling for now.

On the topside, initial resistance is located at the 200-period SMA at 157.43, followed by the 100-period SMA at 157.89 and the horizontal barrier at 158.00, with a stronger cap at 159.00 if gains extend. On the downside, immediate support emerges at 156.50, ahead of a deeper structural floor at 155.50, where buyers would be expected to defend the broader uptrend if the current pullback accelerates.

(The technical analysis of this story was written with the help of an AI tool. Know more.)