USD/JPY recovers from its sudden fall, in the face of threats of intervention by the Japanese authorities

• USD/JPY experienced a significant drop, quickly losing 67 points, before stabilizing around 151.52, with a slight rise of 0.03%.
• Japanese Producer Price Index data showed a contraction, justifying the Bank of Japan’s ultra-loose policy.
• Traders are now focusing on the US CPI release on Tuesday, which is expected to show a slight moderation in inflation rates.

USD/JPY pared some of its previous losses after plunging 67 pips in the last hour to a daily low of 151.20 in the absence of news and the reiteration of comments from the Japanese authorities that the currency movements are undesirable and reflect the fundamentals. At the time of writing, USD/JPY is around 151.52, with a gain of around 0.03%.

USD/JPY takes a sharp but brief decline, recovers as the market digests US inflation expectations and economic data from Japan

On the US economic agenda, the New York Fed’s inflation expectations survey was published, with data showing that US households estimate one-year inflation at 3.6% in October, down from 3.7% last month, while on a five-year basis, it fell to 2.7% from 2.8%. Following these data, the Dollar Index (DXY), which measures the value of the dollar against a basket of six currencies, fell from 105.77 to 105.69, while Wall Street pared some of its previous losses.

The governor of the Federal Reserve, Lisa Cook, crossed the news but gave no clues about monetary policy. The USD/JPY pair is preparing for the release of inflation figures on Tuesday, November 14, with a Consumer Price Index (CPI) expected at 3.3% year-on-year, up from 3.7% previously, and an underlying CPI of 4.1 %, compared to the previous 4.1%.

Meanwhile, the USD/JPY pair plunged from a daily high of 151.88 towards 151.20 around 15:01 GMT, with the move halted around 15:07 GMT at 151.20, as buyers entered the markets, raising the exchange rate towards the current spot price.

During the Asian session, Japanese data showed the Producer Price Index contracted 0.4% month-on-month in October, below estimates of a 0% reading and September’s 0.2% contraction. The annual figure fell to 0.8% from 2.2% in September.

Following the data, Japan’s Finance Minister Suzuki said that “sharp currency movements are not desirable,” adding that they “should be determined by fundamentals.”

USD/JPY Price Analysis: Technical Outlook

Following a likely intervention, USD/JPY is forming a “spinning top”, and a “double spinning top” chart pattern could be emerging, although the break of the last cycle low, seen at 149.18, is crucial to pave the way for a recoil. To do this, sellers must intervene and drag prices below the Tenkan-Sen at 150.55, followed by the Senkou-Span A and the Kijun-Sen, each at 150.25 and 150.00, respectively. Once surpassed, the next level would be 149.00 and the cycle low of November 3 at 149.18.