Financial authorities in Japan, specifically the Ministry of Finance and the Bank of Japan have been making ‚verbal intervention‘ statements in recent months as the yen has depreciated. Authorities do not want the currency to decline rapidly and use the comments to slow its drop.

However, at some stage, if the yen falls too far for comfort, there will be actual intervention, in the form of selling USD/JPY. There may be some cross-selling but the bulk of intervention will be in USD/JPY.

In October 2022 the Ministry of Finance instructed the Bank of Japan to sell USD/JPY, actual intervention. In the weeks leading up to this there were warnings from authorities. These have gradations. I posted back in early June a guide to how these warnings escalate:

• The 4 phrases from Japanese officials to listen for signalling imminent yen intervention

I’m adding a little more now, as we are getting closer to levels of concern.

Watch for words like „undesirable“, „rapid“, and „not reflecting fundamentals“. For example:

• sudden/abrupt/rapid movements in exchange rates are undesirable
• markets that aren’t reflecting economic fundamentals are undesirable

As an escalation of statements, watch for „one-sided“, „excessive“, and „speculative moves“. For example:

• FX moves have been speculative
• yen movement is a speculative activity
• yen moves have been one-sided, moves have been excessive

Further escalation is indicated by the warning of action to come, and is the time to be prepared for actual intervention:

• won’t rule out any options
• ready to take action at any time
• we could conduct stealth intervention
• we are on standby

The next step is what is referred to as a „rate check“. This is when the Bank of Japan contacts FX dealers at banks and asks for a dealing level in USD/JPY. Dealers quote the Bank a two-way price, a bid, and an offer. This is a bit of a charade as everyone knows what’s going on, the BOJ is intervening by making a threat of intervention. While this is going on dealers will contact other banks and sell USD/JPY heavily, in effect ‚front running‘ the BOJ. This is what the BOJ wants to happen, it’s a form of intervention without buying any yen and selling USD (from reserves).

The next step is actual BOJ USD/JPY selling. This follows a rate check, maybe by weeks, maybe by days, maybe by only hours. Instead of just asking for a two-way price, i.e. checking the rate, the BOJ will get the price and then deal on it, selling USD/JPY to the dealer. the banks dealer will then get out of that position as best he or she can, all the while trying to sell extra because the BOJ is in the market slamming USD/JPY lower and there is money to be made. the effect is cascade of USD/JPY selling, driving it lower. Intervention.

Japan’s Finance Ministry’s Vice Finance Minister for International Affairs Kanda. It’s the MoF that will instruct the Bank of Japan to intervene. And Kanda is the official responsible for doing so. You’ll often see me referring to Kanda in posts as „yen intervention guy“. Other references to him include Japan’s ‚top currency diplomat‘.

This article was written by Eamonn Sheridan at www.forexlive.com.

• Apple closes above $3 trillion in market cap. Nasdaq has best start to year in 40 years
• WTI crude oil futures settled at $70.64
• Baker Hughes oil rig count -1 to 545 rigs
• Dallas Fed Trimmed mean price index falls to 3.2% annualized versus 4.3% in April
• Feds Goolsbee: There is nothing in the Feds mandate about stock prices
• European equity close: Strong finish to the quarter
• Atlanta Fed Q2 GDP Now +2.2% vs +1.8% prior
• US Supreme Court strikes down Biden’s student loan forgiveness program
• Bank of Canada Q2 business outlook survey sees improving inflation expectations
• Former ECB vice-president says the hiking cycle will end in July
• June UMich final US consumer sentiment 64.4 vs 63.9 expected
• SEC says spot bitcoin filings are inadequate – WSJ
• US May core PCE inflation +4.6% y/y vs +4.7% expected
• Canada GDP for April 0.0% versus 0.2% expected
• The GBP is the strongest and the CHF is the weakest as the North American session begins
• ForexLive European FX news wrap: Dollar mixed, Eurozone core inflation sticky

US core PCE prices (excluding food and fuel costs) for the month of May rose 0.3% as expected but the YoY level was mostly lower at 4.6% versus 4.7% last month and expected. The PCE price index fell from 4.3% to 3.8%. That was the 1st decline below 4% since early 2021. Personal consumption (adjusted for inflation) was flat after 0.2% last month. Personal income increased 0.4% versus 0.3% last month. Adjusted for inflation, May’s spending was flat.

Later the University of Michigan consumer sentiment exceeded the preliminary index of 63.9 with a rise 64.4. The gain was much higher than the 59.2 last month. Within the report, the 1-year inflation expectations remained steady at 3.3% (versus 4.2% last month). The 5-year inflation expectations was also steady at 3.0% (same as the preliminary) and down marginally from 3.1% last month.

The USD moved lower as traders focused on the hopes for even lower inflation going forward. The USD is ending the day as the weakest of the major currencies. The NZD is the strongest.

It is month end and looking at the major currencies vs the USD this month, the USD is mostly lower. The exception is vs the JPY with the USD gaining 3.58% vs that currency.

Below are the % changes of the USD vs the respective currencies in June.

• EUR: -2.06%
• JPY: +3.58%
• GBP, -2.07%
• CHF, -1.71%
• CAD -2.38%
• AUD: -2.45%
• NZD: -1.96%

For the 1H of 2023, the USD was mixed with a strong 10%+ gain vs the JPY. The greenback also moved higher vs the AUD and the NZD, but was down vs the EUR, GBP, CHF, and AUD. The dollar was the weakest vs the GBP (down 5%) :

• EUR: -1.96%
• JPY“ +10.07%
• GBP: -5.03%
• CHF: -3.16%
• CAD: -2.16%
• AUD: +2.27%
• NZD: +3.33%

Looking at other markets today:

• WTI crude oil futures rose $0.61 or 0.4% $70.45. For the month prices are up 3.47% (up $2.34).
• Gold rose $11.95 or 0.63% at 1919.36. For the month, the price fell -2.21% (down $43.41)
• Silver today rose $0.19 or 0.84% at $22.74. For the month prices are up 3.45% (up $2.36)
• Bitcoin had a volatile day with the price moving down to a low of $29,508 after trading as high as $31,268. It is trading at $30,339. For the month bitcoin rose 12% or $3178

Looking at the US stocks today, the major indices all closed solidly higher. The gains were led by the NASDAQ index which had its best 1st half of the year in 40 years.

• Dow industrial average rose 285.18 points or 0.4%
• S&P index was 53.92 or 1.23%
• NASDAQ index rose 196.60 points or 1.45%

For the trading month:

• Dow industrial average rose 4.56%
• S&P index rose 6.47%
• NASDAQ index rose 6.59%

The gains in the 2023 have been propelled by large cap tech stocks.

Some of the 1H big gainers included:

• Nvidia rose 189.46%
• Meta up 1.38.47%
• Tesla rose 112.51
• Microsoft rose 42%
• Apple rose 49.15%
• Amazon rose at 50.13%
• Alphabet rose 35.67%
• Broadcom rose 55.14%
• Chipotle rose 54.16%

Next week, starts with holiday trading in the US due to the 4th of July holiday on Tuesday. The stock and bond markets will close early.

The week will end with the all-important US jobs report with Non Farm Payroll expected to add 222K (last month plus 339K). The unemployment rate is expected to dip to 3.6% from 3.7% last month and average hourly earnings are expected to rise by 0.3%.

Canada will also release jobs data on Friday, with limited change of 22,000 expected (versus -17.3 thousand last month.

In between, the other key events include:

• Reserve Bank of Australia will announce its latest rate decision on Wednesday in Australia. Market participants are torn between no change and a 25 basis point hike
• ISM data will be released on Monday in Europe and the US.
• FOMC meeting minutes will be released on Wednesday at 2 PM
• US Services PMI will be released on Thursday.

Thank you for your support. Have a great weekend.

This article was written by Greg Michalowski at www.forexlive.com.

The price of Apple closed above $3 trillion for the 1st time. It was also the 1st company to do that. The NASDAQ index had its best start to the year in 40 years.

The major indices all closed higher for the week and the month.

The final numbers are showing:

• Dow industrial average rose 285.16 points or 0.84% at 34407.59
• S&P index was 53.92 points or 1.23% at 4450.37
• NASDAQ index rose 196.60 points or 1.45% at 13787.93

The Russell 2000 small-cap stocks rose 7.14 points or 0.3% at 1888.73.

For the week:

• Dow industrial average rose 2.02%
• S&P index rose 2.35%
• NASDAQ index rose 2.19%

For the month of June:

• Dow industrial average rose 4.56%
• S&P index rose 6.47%
• NASDAQ index rose 6.50%

For the 2nd quarter:

• Dow industrial average rose 3.41%
• S&P index rose 8.30%
• NASDAQ index rose 12.81%

For the 1st half of 2023:

• Dow industrial average rose 3.8%. In comparison in 2022 the Dow industrial average fell -8.78%
• S&P index rose 15.91%. In 2022 the S&P index fell -19.44%
• NASDAQ index rose 31.73%. In 2023 the NASDAQ index fell -33.10%

This article was written by Greg Michalowski at www.forexlive.com.

There is no give up in the stock rally. The Dow Industrial Average now up 1% on the day. The S&P is up 1.38%. Both are making a new session highs. The NASDAQ index is off its eyes but only marginally. It leads the way with a gain of 1.6%.

This article was written by Greg Michalowski at www.forexlive.com.

The USDJPY moved lower today, coming off the boil a bit (see videos here and here).The drift lower started against a channel trend line against swing highs from this week (green numbered circles). The lows have inched below the lower channel trend line but stalled ahead of the rising 100-hour MA (blue line) currently at 144.19. The low for the day has reached 144.194.

What next?

We are heading into the close and it looks like the price will remain above the 100-hour moving average. That will leave next week open to either probe further to the downside on a break, OR bounce off the level and continue the bullish bias.

Fundamentally, the BOJ remains committed to expansionary policy. The Fed is likely to hike in July and potentially more in 2023,

However, if there is a shift in policy in Japan, or if the BOJ intervenes, there can be a flush back to the downside. .

This article was written by Greg Michalowski at www.forexlive.com.