The US dollar has choppy against the yen on Friday, but it looks as if there are buyers willing to stabilize this pair.
USD/JPY
The US dollar has been all over the place during the trading session on Friday, but this is a pair I'll continue to watch very closely. After that intervention on Thursday that the Japanese slammed them down, they had nothing to do even though they had just threatened to intervene 1 hour or 2 before, it actually happened.
That being said, the 156 yen level is an area that I think continues to offer support and it is an area that's been important multiple times, so I do think it's probably only a matter of time before we truly start to take off here and I like the idea of taking advantage of any value you see in the US dollar at this point.
Interest Rate Differentials and Bank of Japan Recourse
As the interest rate differential still favors the US dollar and that intervention—let's be honest—was probably a desperation move more than anything else. So with that being the case, this is a market that given enough time will more likely than not continue to be noisy, but I also recognize that I still would anticipate that there would be a lot of people out there willing to hang on to the dollar due to the uncertainty of the situation around the world and of course the certainty of the interest rate differential here.
The Bank of Japan has no real recourse to tighten monetary policy at this point, at least not sustainably, as the debts in Japan are just far too extensive for the Japanese to maintain at a higher interest rate. With that, I think it's probably only a matter of time before we go higher and it looks to me like the 156-yen level is in fact offering a little bit of a floor in the market which is something my analysis had actually kind of picked up on previously. So, this intervention just proved that and now it looks like we grind higher.