Credit Agricole forecasts USD/JPY in 155-160 range on intervention and yields

The new week sees USD/JPY starting on a weaker note, with Credit Agricole suggesting traders are growing more at ease within a well-known trading band.

According to the bank, the currency pair may have re-entered a 155.00 to 160.00 zone, following a decline that could not sustain a break below 155.00. On the upper end, Credit Agricole anticipates greater caution among traders regarding a move above 160.00 due to potential intervention.

This perspective aligns with recent signals from Tokyo. Japan's top currency official Mimura reiterated the intervention warning, urging markets to heed the 'very clear' message from Japanese and US authorities. While he did not confirm imminent action, the warning carries weight as USD/JPY approaches 160.00.

Technical indicators are also reinforcing this cautious stance.

The pair had appeared poised for another advance after surpassing the 200-day moving average and a descending trendline from July. But the bullish breakout began to weaken last week, and the ongoing reversal has solidified the breakdown today.

Following Mimura's remarks, USD/JPY has fallen back toward 157.00, staying well under the previous breakout points.

The decline has also pushed the price below the 61.8% Fibonacci retracement near 157.52, bringing the 50.0% Fib level around 156.64 into view. Below that, 155.75 is the next support before the key 155.00 level.

At present, technical factors broadly support Credit Agricole's 155-160 range. Intervention fears present a growing barrier near the upper boundary, but USD/JPY's movements are not dictated solely by Japan's yen policies.

Treasury yields, a key driver of USD/JPY sentiment, continue to play a major role. Rising yields have bolstered the dollar, increasing the significance of Friday's US jobs report. Strong data would support the narrative of sustained higher interest rates.

This creates an interesting tug-of-war for USD/JPY.

A further rise in yields could provide enough support for USD/JPY to test 158.00 and possibly approach 160.00. But intervention risks will likely limit gains, as traders avoid chasing momentum too aggressively due to concerns about official responses from Japan or the US.

Nevertheless, the 160.00 mark is where intervention risks become most acute. Yet the US jobs data and bond market response may ultimately determine if USD/JPY gets another opportunity to test that level.