Disasterous day: The yen is a big problem for Japanese officials

On Friday, USD/JPY rose by 220 pips, a situation undesirable for Japan, as the persistent strength of the US dollar creates problems. Recently, the Bank of Japan raised rates to 0.75%, the highest in 30 years, which disrupted the carry trade and did not support the yen as intended. Additionally, Japanese Finance Minister Satsuki Katayama expressed alarm over the currency's volatility, hinting at potential intervention, but the market quickly dismissed this. From a technical perspective, the charts indicate that while November highs are still holding, there remains a significant distance to 2024 highs, over 400 pips away. The yen's weakness is further underscored by the EUR/JPY pair hitting all-time highs. Concerns about rising import prices and borrowing costs for Japanese government bonds at their highest in three decades highlight the potential for economic strain. As we move into the least liquid period in forex markets, there are indications that intervention may be attempted, creating additional risk for holding long positions in USD/JPY, as the sentiment remains bearish amidst these developments.