On Intervention Watch

USD/JPY gains have continued this morning, with the pair making fresh multi-decade highs. We briefly got above 143.50, before moving back to 143.35/40 currently. The market is likely to continue to test the resolve around intervention risks from the authorities.

• Intervention risks are clearly on the rise, although the rhetoric from officials hasn't shifted greatly over recent sessions. The market will be looking for more forceful language that the authorities are getting closer to acting.
• Recall back in June officials from the BoJ, MOF and FSA met to discuss the currency and stated concern around the rate of depreciation and would take action if necessary. It’s possible another such meeting could take place today or over coming sessions.
• Still, the factors driving yen weakness, higher core yields, particularly in the US overnight, remain very much in focus. It may be difficult for USD/JPY to peak without a turnaround in the relative policy differential and a better terms of trade outlook on a medium-term basis.
• From a technical standpoint, Fibonacci projections look for 144.05 and then 144.67 (which is projected off the August 2 - 8 - 11 price swing). We have already breached the 143.30 projection.
• On the data front, the leading and coincident indices print today.