• Japanese yen fall on Monday amid higher yields.
• Intervention: can it be sustained?
• USD/JPY with bullish bias in the very short term.

The USD/JPY is rising on Monday for the second day in a row and reached a six-day high at 148.83, before pulling back to the 148.50 area. The yen is among the worst performers even as equity markets in the US decline.

Higher US yields continue to be a key driver in USD/JPY. The US 10-year yield is holding firm above 4.00% while the 2-year approaches 4.50% again.

Intraday, the pair is moving with a bullish bias. The next resistance is seen around 149.10. On the flip side, support levels are 148.25 and 147.80.

Critical days ahead

Economic data released on Monday in the US showed an unexpected decline in the Chicago PMI and also in the Dallas Fed Manufacturing Business Index. Despite the numbers, the greenback remained in positive ground against most currencies. On Tuesday the ISM Manufacturing Index is due.

The FOMC will end its two-day meeting on Wednesday. The Fed is expected to raise the key interest rate by 75 basis points. On Friday, is the Non-farm payrolls report. Those events are likely to keep volatility elevated over the next sessions.

Data released in Japan gave light on the recent intervention from authorities to curb the yen’s weakness. After spending around 20 billion dollars in September, the total in October was above 40 billion. “In total, these interventions represent nearly 6% of its total foreign reserves and so it’s clear that this pace cannot be sustained on a regular basis. Rather, we think the BOJ will continue to intervene sporadically and quietly to try and keep the markets guessing. With the BOJ delivering another dovish hold last Friday, we think USD/JPY remains a buy at current levels”, said analysts at Brown Brother Harriman.

Technical levels