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Mark O' Donnell
 · 
Research Analyst
September 22, 2022
 · 

FOMC vs BoJ Intervention

  • Today’s FOMC meeting policy the USD/JPY moved towards the upside breaking a daily consolidation level
  • However, Japan is now prepared at any time to intervene in the forex market

Today’s FOMC meeting policy was as expected, with a 75-basis-points rate hike to 3.25%. In reaction, the USD/JPY moved towards the upside breaking a daily consolidation level. 

The JPY, however, may find some support after the Bank of Japan (BoJ) carried out a rate check in preparation for a possible intervention for the currency. Japan is now prepared at any time to intervene in the forex market to support the yen (by selling dollar/ buying yen), if needed. 

On the technical side, after the rate decision from the FED, the 145.00 price level comes into stronger focus. 

According to Mean Reversion Channel (Fareid's MRI variant) Indicator, the price is currently hovering at the weak overbought condition zone. As such, there is a suggestion that the USD/JPY still has a limited potential to the upside before reaching the strong overbought area. If the price breaks above the 145.00 resistance level, the MRC indicator suggests that a target above 147.00 may be wishful thinking in the very near term. 

BoJ
USD/JPY 1D, with Mean Reversion Channel Indicator  

Long-term targets would be around 150.00, and the 1990 high price point of 160.00. These longer-term targets are contingent on the BoJ remaining neutral and not intervening in the currency markets. 

If the BoJ does in fact intervene, watch for the price to test 143.00 support area. Without knowing exactly how far the BoJ will go to support the yen, the market may get spooked and a larger sell-off in the USD/JPY than the BoJ is directly responsible for may occur. A break below that zone could potentially retest the 140.353 indicated by the MRC. 

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