📝 Japan Government Unlikely to Intervene In USD/JPY: UBS Strategy

USDJPY was breaking up through the year's highs at 13115/35 on Monday and has continued to push higher on the back of what was probably dollar buying from macro and model names. This has manifested itself through both spot and options, the latter of which is evidenced by the lm 25d risk reversal moving back into positive territory.

Additionally, local names also seemed to have been be on the bid, based on the price action.

Tuesday's North America session opens near 132.80/90 and it's likely USDJPY remains bid on dips. 131.25/35 is the first key level to watch on the downside (the breakout area), but, in the very short-term, keep an eye on 131.80/00.

On the topside, the overnight high at 133.00 is initial resistance. Buying dips continues to make sense. EURJPY has continued higher post its break of 140.00 to the topside, touching a high of 142,02 overnight. USDJPY is doing all the heavy lifting in terms of taking EURJPY higher, as broad USD buying seems to dominate G10 FX. Dips into 140.00 should remain supported.

Finally, Japanese Finance Minister Suzuki reiterated his view that sudden moves in FX aren't desirable" and that the ministry is "monitoring FX with a sense or urgency". This sort of verbal intervention is likely to increase as USDJPY grinds higher; ultimately, however; it's unlikely there will be any actual intervention from the Japanese government given current the Bank of Japan's very loose monetary policy. - UBS Strategy