USD/JPY breaks 160, will Tokyo intervene?

Japanese yen slumps to 37-year low

USD/JPY is trading at 160.68 in the North American session, up 0.62% on the day.
The Japanese yen broke below the psychological barrier of 160 today and has fallen to its lowest level since December 1986. The Japanese currency had been hovering just below 160 throughout the week and has finally broken through.

The yen’s downward move has raised concerns that the Bank of Japan will intervene in the currency markets yet again. The BoJ is believed to have intervened on April 29 and again on May 1, selling some $61 billion and purchasing yen.

Japanese officials have warned in recent days that they will respond to excessive volatility in the currency market but the jawboning hasn’t been enough to stem the yen’s slide. Since the start of the year, the yen has declined a staggering 13.8% against the US dollar, and there doesn’t seem to be any light at the end of the tunnel.

The Fed isn’t planning to lower rates until September at the earliest and with the BoJ showing no indications of raising rates, the US/Japan rate differential will continue to weigh heavily on the Japanese yen. The currency interventions pushed the yen higher for a brief time only and has failed to stem the yen’s sharp depreciation.

Japan releases retail sales for May on Thursday. The market estimate stands at 2.0%, lower than the April reading of 2.4%. Retail sales have shown expansion for 26 straight months, as signs of higher wages have driven consumer spending.
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USD/JPY Technical

• USD/JPY is putting pressure on resistance at 160.72. Above, there is resistance at 161.65
• There is support at 158.94 and 158.01

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