[USD/JPY] Rebound by more than half from intervention — Reasons to still believe it will move toward 148-149 yen
Dollar yen is currently around 158.7.
Although it was knocked down to around 155 by intervention, it has already retraced more than half. The decline still does not continue as before.
Honestly, as a person with a short position perspective, the unfolding is frustrating.
The reality that it won’t go down
I’ve written this many times. “There is an advantage to shorts,” “Longs at this level are dangerous.”
But the reality is a repeat of falling and then rallying. Whether it’s verbal intervention or actual firepower intervention, it ends up being pushed back.
“Maybe going long is the correct answer after all?”
I can feel that more people are thinking that. In the short term, indeed that is true. Buying pressure is strong. Many who bought may have taken profits on the rally.
But my medium-to-long-term view does not change.
Why I won’t change to a bearish outlook
Please look at the daily chart.
The answer is in this chart.
The area encircled in yellow. This is the “gap up” (high open) window.
This gap opened right after Sanae Takashi won the Liberal Democratic Party leadership election in 2024. The gap remains around 148–149 yen.
In the trading world there is a saying “gaps are filled.” It isn’t 100% but historically gaps opened are often filled sooner or later.
This Takashi gap has not yet been filled. In other words, I expect a move toward 148–149 yen at some point.
Thinking in short-term and medium-to-long-term separately
This is an important point.
Short term (days to weeks):There is strong yen selling, and pullbacks occur easily. A range of 158–160 yen. There are occasions where short-term longs can profit.
Medium to long term (months):Toward the 148–149 yen Takashi gap. The 160 yen triple top has not collapsed. Each time intervention is repeated, a ceiling is increasingly anticipated.
Just because it rose in the short term does not mean the medium-to-long-term direction has changed.
I think the current retracement is a “pullback within a downtrend.” The retracement is large, but the trend has not changed.
A scenario heading toward 148–149 yen
What specific developments do I imagine?
Scenario 1: Bank of Japan rate hike triggers it
If the BOJ proceeds with an additional rate hike, the yen will strengthen rapidly. Depending on the size of the hike, reaching the 148 yen area could happen in an instant.
Scenario 2: U.S. rate cuts trigger it
If the Fed moves to cut rates, the U.S.-Japan interest rate gap narrows, accelerating dollar selling and yen buying.
Scenario 3: Continuous real-firepower interventions
Verbal interventions won’t suffice, and real-firepower interventions occur in succession. It’s a past pattern where the move can be 5–10 yen at a time.
In all scenarios, the target level is the Takashi gap at 148–149 yen.
Current approach
① Base stance is to maintain a short-bias
As the medium-to-long-term view hasn’t changed, the base is short. However, yen selling is strong now, so timing matters.
② Short around 159–160 yen
In this retracing market, it’s important to wait for a pullback. If it comes to the upper 159s–160, enter short. There’s no need to rush selling in the 158 yen area.
③ Short-term long positions aren’t ruled out
Since it’s rising in the short term, aiming for short-term longs is reasonable. But don’t chase. Take profits in the 159 region. It’s dangerous to hold beyond 160.
④ The position when the gap is filled is what matters
When it finally moves toward 148–149 yen, the outcome depends on whether you hold a short position. A decline of more than 1,000 pips is possible. Whether you can ride this wave will determine this year’s performance.
Summary
・Retraced more than half from intervention. Yen selling remains strong
・However, the medium-to-long-term bearish view remains unchanged ・Takashi gap (148–149 yen) has not been filled yet
・Gaps will be filled. I believe the price will head toward that level eventually
・Short-term is dominated by yen selling. Medium-to-long-term is short-biased
・Enter shorts around 159–160 yen
・Riding the big wave of gap filling will decide this year’s outcome
Just because it won’t go down doesn’t mean you should abandon a bearish view. The market moves when everyone has given up.
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Is it OK?