Yen Weakens to Critical Intervention Zone as Policy Divergence Weighs

Key Takeaways:

*USD/JPY broke above 153.00, its highest since February, as Japan’s political and monetary divergence weighed on the currency.

*The central bank boosted JGB purchases, pushing 10-year yields lower and further eroding the yen’s rate appeal.

*The 153.00–155.00 zone marks a historical intervention area, with traders watching for potential Ministry of Finance action to stem further declines.

Market Summary:

The Japanese yen extended its decline against G7 peers, with USD/JPY surpassing the 153.00 threshold to reach its highest level since February, as political and monetary policy developments converged to undermine the currency. The victory of Sanae Takaichi in the ruling party leadership election over the weekend has heightened concerns about fiscal-monetary policy divergence, with the incoming prime minister advocating expansionary fiscal measures while the Bank of Japan maintains its accommodative stance.

The BoJ compounded yen weakness by increasing its Japanese government bond purchases yesterday, a technically dovish operation that suppressed yields and lifted the 10-year JGB price above 100.00 for the first time since July. This deliberate yield control has further eroded the yen’s interest rate appeal, particularly against the Federal Reserve and European Central Bank, despite expectations that their policy differentials will narrow later this year.

The currency now trades at levels that historically have prompted intervention by Japanese monetary authorities. The 153.00–155.00 zone has previously triggered both verbal intervention and direct market operations from the Ministry of Finance, creating a significant technical and psychological barrier for further yen depreciation.

While fundamental factors continue to favor yen weakness in the immediate term, the combination of extreme positioning, potential policy response, and eventual narrowing of global rate differentials suggests the currency may be approaching an inflection point. Market participants are closely monitoring for any signals from Japanese officials that could indicate readiness to support the currency, which would likely catalyze a sharp near-term reversal.

Technical Analysis 

UDSJPY, H4

The USD/JPY pair has advanced 3.4% since the beginning of the week, reaching 153.00—its highest level since February—before showing signs of near-term exhaustion. The pair is now testing critical support at the 151.60 level, with a breach potentially signaling a technical retracement toward the 150.50–150.80 zone.

Despite this near-term consolidation, the broader technical structure remains bullish. The pair’s ability to maintain support above 151.60 would suggest the current pause represents healthy profit-taking rather than a trend reversal, potentially setting the stage for another leg higher.

Momentum indicators continue to support a constructive outlook. The Relative Strength Index is approaching overbought territory, reflecting strong buying pressure, while the Moving Average Convergence Divergence shows signs of rebounding above its zero line. This configuration suggests that underlying bullish momentum remains intact despite the recent consolidation.

Resistance Levels: 154.70, 158.60

Support Levels: 151.55, 148.00