Speculation of intervention had been building for weeks as USD/JPY climbed back towards its 2024 highs. What caught markets off guard was the coordinated action with the US Treasury, giving last week’s intervention considerably more credibility than many had anticipated.
The sharp sell-off dominated the headlines, but the next question is how markets respond. As USD/JPY begins its first meaningful recovery on lower timeframes, the market may reveal whether last week’s intervention marked a temporary interruption or the beginning of a broader change in character.
The weekly chart provides some valuable perspective.
Before last week’s intervention, USD/JPY had been in a well-established uptrend for almost two years, consistently producing higher highs and higher lows while remaining supported by its long-term trendline. The move above the previous highs suggested buyers were once again attempting to extend that trend.
Last week’s intervention interrupted that momentum, but it has not yet dismantled the broader structure. The long-term trendline remains intact, and the sequence of higher swing lows has yet to be broken.
Past performance is not a reliable indicator of future results
Large policy-driven moves often dominate short-term sentiment, but they do not automatically end established trends. From a longer-term perspective, the market has been challenged rather than defeated.
The daily timeframe paints a more cautious picture.
Months of steady technical progress were unwound in just two trading sessions. USD/JPY broke back below the previous breakout area around ¥162, fell through its rising trendline, and slipped beneath the 50-day moving average. More importantly, the character of the market changed almost overnight.
For much of the past year, periods of weakness were generally followed by renewed buying interest in line with the prevailing trend. Last week’s intervention challenges that assumption. The market is no longer behaving as it was before, and that alone suggests the previous technical framework may no longer apply.
The coordinated nature of the intervention also changes the backdrop. Markets had been expecting Japan to defend the yen if necessary. The willingness of the US Treasury to participate adds another dimension, increasing the credibility of future intervention should USD/JPY once again come under upward pressure.
The first recovery could be the real signal
The four-hour chart now becomes the key tactical timeframe.
Following last week’s sharp decline, USD/JPY has started to recover as short-term buyers return to the market. Under different circumstances, this type of bounce would often be viewed as a routine pullback opportunity within a broader uptrend.
This time, however, the recovery carries greater significance.
The next area to watch is the zone that acted as support before last week’s intervention. If buyers struggle to reclaim that zone and momentum begins to fade, it would suggest the market is starting to accept lower prices following the intervention, strengthening the argument that the daily change in character is beginning to influence the broader trend.
Equally, a decisive recovery back through the broken support would indicate buyers remain willing to challenge last week’s move despite the prospect of further official action. That would not eliminate intervention risk, but it would suggest the longer-term trend still commands enough conviction to absorb last week’s shock.
Rather than focusing on whether the intervention happens again, traders may learn more by watching how the market behaves during this first recovery. The reaction around former support is likely to provide a clearer indication of conviction than the intervention itself.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
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