- USD surges to an 11-month high vs. JPY on Fed’s rate hike signals.
- BoJ’s commitment to low rates, coupled with US gov shutdown risk, adds USDJPY uncertainty.
On Monday, the USD/JPY dollar hit an 11-month peak, a move triggered by the Federal Reserve’s recent signaling of another potential interest rate hike and an intention to maintain higher rates for longer.
Then, (counter to expectations) the yen faced pressure when the Bank of Japan, on the preceding Friday, decided to maintain its ultra-low interest rates and its commitment to support the economy until sustainable inflation reaches its 2% target. This decision indicated that the central bank was in no hurry to phase out its extensive stimulus program. Traders had been looking for some kind of hint as to when the BoJ would start to dial back its support. Wishful thinking, I guess.
The Japanese yen is currently hovering near the 150 mark, a level some traders consider critical to prompt intervention by Japanese authorities, similar to actions taken last year.
But can the USDJPY even reach 150 with a potential US shutdown on the horizon?
Starting on October 1, hundreds of thousands of US government workers face furloughs if Congress fails to pass a funding bill. The House is set to reconvene after last week’s recess, aiming to continue budget negotiations.
If a federal government shutdown occurs, the publication of crucial US economic data, such as employment and inflation report vital for policymakers and traders, will be indefinitely suspended too.
So maybe the downside risk is ever-present even without the threat of BoJ intervention? On the USD/JPY chart we can see the 145.164 is the immediate support that might fall to the bears. 138.312 is the next target, but can a US government shutdown force the price down to this level over one day like an intervention might? Maybe this level is an intermediate term risk rather than short term?
