FX Daily: US holiday offers Japan intervention window
The desk interprets recent commentary as indicating that the current USD/JPY level presents a unique opportunity for Japanese authorities to intervene in foreign exchange markets, particularly given it coincides with a US holiday that typically witnesses lower liquidity. The strength of the dollar, bolstered by hawkish sentiments post-Federal Reserve, continues to keep USD/JPY well bid, which raises the stakes for a potential intervention by the Bank of Japan. Per the full note from ing-think, today's lower liquidity may provide the necessary window for intervention as USD/JPY already trades above its 2024 highs, allowing speculators to push levels if left unchecked. Market sentiment is currently leaning toward a priced expectation of two Fed rate hikes by year-end, which could further heighten volatility in the FX landscape.
What the desk is arguing
The desk frames the sentiment surrounding USD/JPY as a dynamic market situation where Japanese authorities might be more inclined to intervene. The low liquidity conditions prompted by the US holiday create a potential entry point for intervention, as articulated in the recent analysis from ing-think.
Supporting evidence includes the observation that the dollar remains poised for its best weekly performance since April 2024, indicating robust bullish sentiment which could drive USD/JPY even higher if no intervention occurs. DXY's movement above 101.00 underscores the dollar's staunch strength against a backdrop of diminishing Fed enthusiasm perceived in the macro landscape.
Where it sits in our coverage
Our internal consensus target for USD/JPY currently stands at 157.0000, with a range from 149.0000 to 160.3427 among various firms. Specifically, hsbc targets 145.0000 by December 2026, while deutschebank sees it at 143.0000, reflecting varied outlooks on JPY strength moving forward.
The desk's view suggests upward pressure on USD/JPY, which is at the upper bound of current forecasts, indicating potential for increased volatility if intervention does not materialize as expected.
How other firms see it
The consensus view from firms like hsbc and mufg aligns with the desk's argument for potential JPY weakness, advocating targets near or above current levels. Conversely, contrary firms such as barclays and bofa appear more cautious about the dollar's sustained strength, projecting lower targets for JPY against the dollar.
Across the broader FX market, the EUR/USD trajectory mirrors the Fed's sentiment and impacts expectations in another major dynamic currency pair, influencing correlated movements in USD/JPY.
What the calendar says
No high-impact events are scheduled in the coming weeks, rendering the market's focus sharpened on possible BoJ intervention and evolving economic reports, as current positioning remains fluid without additional data catalysts on the horizon.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Potential for JPY intervention heightens given USD/JPY trading above 2024 highs.
- 02Current market sentiment reflects post-Fed bullishness for the dollar.
- 03USD/JPY targets show divergence among firms, indicating varied outlooks.
- 04Low liquidity environment increases volatility risk if intervention does not occur.
Market implications
Watch the USD/JPY level closely as it hovers above 157.000; a failure to intervene today could lead to aggressive trading from speculators. With no upcoming events, market reactions may be hinging on future rate prints from the Fed and macroeconomic indicators.
Risks to this view
The primary risk to this call is if external catalysts, such as unexpected macroeconomic data or a coordinate intervention by other central banks, emerge that could alter investor sentiment and weaken the dollar's current momentum.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
Articles FX Daily: US holiday offers Japan intervention window 07:48 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar has retained its post-Fed gains, keeping USD/JPY well bid. Today’s US holiday may offer attractive liquidity conditions for new JPY FX intervention. In the UK, Andy Burnham secured a parliamentary seat and is widely expected to become the new Prime Minister in coming months.
We have published a new EUR/USD forecast, expecting 1.18 by year-end Frantisek Taborsky , Francesco Pesole and Chris Turner Today’s US holiday creates a lower-liquidity backdrop, a window during which Japanese authorities have previously shown a preference to intervene USD: Eyes on USD/JPY given US holiday The dollar’s momentum remained strong for a full session after Wednesday’s hawkish surprise. Overnight, DXY tested levels above 101.00, on track to have its best week since April 2024 . We aren’t at all convinced this is the start of a broader USD appreciation cycle.
The US-Iran peace deal removes a bullish argument for the dollar, and our macro team still thinks markets are overestimating the chances of a Fed hike. But in the near term, the dollar may enjoy post-Fed enthusiasm for a bit longer, with markets probably keen to fully price two hikes by December at the first strong data print (39bp currently priced in). In the coming days, focus will turn to Fedspeak and how strongly FOMC members are willing to back the hawkish dot plot.
With forward guidance removed, markets have more room to reprice aggressively as US data are released, increasing the risk of volatility in both rates and FX. Today’s US holiday creates a lower-liquidity backdrop, a window during which Japanese authorities have previously shown a preference to intervene. USD/JPY is already deep into intervention territory after breaking above the 2024 highs yesterday.
A lack of intervention today would leave scope for speculators to push towards 162-163 given the supportive USD environment. Francesco Pesole EUR: We have updated our forecasts We have published a new baseline and two alternative forecasts for EUR/USD, along with our updated scenarios for oil, gas, inflation and rates in the US and eurozone. We do see some upside risks for Brent after a potentially overdone selloff, but still expect it to stay below 90$/bbl in the third quarter, allowing FX to keep desensitising from energy prices.
In line with our dovish Fed call (no hikes) relative to pricing, we are expecting USD depreciation in the third and fourth quarters, albeit at a moderate pace. Our new year-end target for EUR/USD is 1.18. Yesterday, ECB Chief Economist Philip Lane suggested the new neutral rate may be 2.50%, effectively suggesting another 25bp hike would still fall short of restrictive territory.
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