USD/JPY looks vulnerable below 141.50 as investors anticipate covert BoJ intervention

• USD/JPY is expected to show losses if it fails to hold above 141.50.
• A moderate move higher in the DXY Dollar Index has concluded now that investors expect only a Fed rate hike.
• The BoJ could carry out a covert intervention if the USD/JPY reaches the 145.00 level.

The pair USD/JPY has faced stiff resistance around 142.15 during the European session. The pair is expected to show further weakness below 141.50while the DXY Dollar Index has shown volatile action after facing stiff resistance around 102.60.

S&P 500 futures have posted significant losses amid market participant caution ahead of the US open after a long weekend due to Monday’s US holiday. Risk appetite has risen seen diminished again, since there are conflicting opinions about the orientation of the Federal Reserve (Fed) with respect to interest rates.

The investors expect the Federal Reserve (Fed) to raise interest rates just once, despite the fact that Fed Chairman Jerome Powell has confirmed two rate hikes by the end of the year. In addition, US Treasury yields have softened following the tracks of the DXY index. Yields offered on US 10-year bonds have fallen to around 3.79%.

Later in the week, Fed Chairman Jerome Powell’s testimony will continue to be in the spotlight. Powell is expected to offer detailed guidance behind keeping interest rates stable in June’s monetary policy. In addition, the new guidelines and the current situation of the banking crisis will be in the spotlight.

As for the Japanese yen (JPY), more than half of the economists polled by Reuters they expect the government of Japan and the Bank of Japan (BoJ) to act to stop the decline of the Yen if it depreciates to the 145.00 level per US dollar. This could be done through a stealthy BoJ intervention.

During the Asian session, the Japanese ministry reported mixed industrial production data for April. The monthly economic data surprised with an expansion of 0.7%, while a contraction of 0.4% was expected. Annualized industrial production contracted 0.7%, above expectations for a 0.3% contraction.

USD/JPY technical levels