[Dollar/Yen急落] Why did it fall from the 162 yen range? The "three reasons" you should know now and the outlook going forward

Recently, the USD/JPY has surged to a high range not seen in about 39 and a half years, reaching the upper-162 yen range, but at the moment it has shown a sudden drop of more than 1 yen at one point, suggesting a shift in the wind.

“I thought the yen would continue to weaken rapidly, so why is it going down?”

Many of you may be pondering this question, right?

This time, we will explain in an easy-to-understand way the “three major reasons” behind the current USD/JPY decline and the “points to watch tonight,” even for beginners!

Three reasons why USD/JPY fell

This drop isn’t so much that something dramatically changed, but rather a confluence of moves that corrected the excessive dollar buying up to now.

① A strong sense of vigilance by the government and the Bank of Japan toward “foreign exchange intervention”

With the pair pushing into the upper-162 yen range, the market’s tension rose to the limit, thinking that intervention by the government or the BOJ could come at any time.

In fact, during Asian trading hours, expectations of intervention triggered substantial dollar selling and yen buying, causing a drop of more than 1 yen to around 161.10 yen.

② Tone-down of expectations for US rate hikes

Until now, the dollar was being bought because there was a belief that US interest rates might stay high for a longer period.

However, recent US economic data (ADP payrolls and ISM manufacturing index) were weaker than expected, and comments from Federal Reserve officials suggesting inflation risks could be retreating led to a move to unwind excessive dollar buying (dollar selling).

③ Profit-taking selling ahead of holidays and major events

With the US heading into a holiday (Independence Day) and fewer market participants, plus the upcoming release of the key indicator “US Non-Farm Payrolls” tonight, traders sold dollars to lock in profits and lighten positions, which accelerated the decline.

Outlook: Tonight’s US Employment Report as the pivotal moment

Although the price is currently lower, the fundamental backdrop of yen weakness, driven by the interest rate differential between Japan and the US, has not changed. Therefore, there are still many players looking to buy on dips when prices fall.

The main focus for future moves is tonight’s release of the US June employment data.

If the numbers are strong: the pair could rise again to the 162 yen range or higher (and the risk of intervention would be at its maximum).

If the numbers are weak: expectations for US rate cuts could rise further, leading to another deeper adjustment (decline).

Summary

The current market trend is upward (dollar strength, yen weakness), but fears of intervention and position adjustments ahead of a major event are creating short-term selling pressure.

After tonight’s data release, whether the price moves up or down, volatility is likely to be high, so avoid forcing entries and wait for the right moment to act.

If you found this article helpful even a little, please like and share!

Now, let’s carefully monitor tonight’s market as well.