The USD/JPY pair continues to fall rapidly amid rumors of currency intervention.

It all started when the Federal Reserve Bank of New York began conducting so-called "rate checks"— inquiries with dealers about the current USD/JPY exchange rate. Analysts interpreted this as a preliminary step before a possible joint intervention with Japan. Essentially, market speculation based on past operations played a decisive role here.

Japanese officials (specifically, Japan's chief currency diplomat, Atsushi Mimura) provided formal and standard statements, stating that they are indeed conducting "close coordination with the US on currency policy and are ready to act in case of extreme volatility." However, they did not confirm (nor deny) reports that specific measures had already been taken. The finance minister (and top officials of the ministry) had previously warned of possible actions to counter speculative pressure on the yen, but these words were not accompanied by confirmed dates or volumes of intervention.

Nevertheless, the market reached a rather categorical conclusion: "there's no smoke without fire." Given the history of the issue, rate checks have indeed often preceded actual actions. Therefore, the actions of the New York Fed became a sort of trigger, leading to a domino effect: a sharp movement in the USD/JPY rate—rumors of intervention—and an even greater movement in the rate.It should be noted that in April 2024, Japanese authorities resorted to currency intervention when the USD/JPY pair exceeded 160.20. This target became a "red line," after which the government decided to intervene. Reacting to this decision, the pair fell by more than 600 pips at that time.

On Monday, a similar situation has developed: last week, buyers of USD/JPY almost reached the 160-figure, after which rumors of intervention from authorities surfaced. In just two trading days (Friday and Monday), the pair fell by nearly 600 pips.

Adding fuel to the fire was Japan's Prime Minister Sanae Takaichi, who on Sunday stated that the government would take "necessary measures against speculative and abnormal movements in the currency market." However, the context of her statement is contradictory. Takaichi did not specify what price movement her comments referred to—whether to the prolonged upward trend of USD/JPY or to the current downward impulse.

But the market interpreted her statement in favor of the yen: the trading week began with a southern gap in USD/JPY, and the pair then fell into the 153-area (for comparison, on Friday, the pair was trading around 159.25).

Now the logical question arises: what comes next? How prolonged will the downward impulse be? Among analysts, there is no consensus on this matter, especially since in similar conditions, past market reactions to currency interventions cannot be directly extrapolated. According to some experts, the nearest "stop" on the southern route will be at 152.50, which corresponds to the Kijun-sen line on the W1 timeframe. According to other analysts, the pair will not reach the boundaries of the 152-figure, and there will soon be consolidation and a corrective pullback into the area of 155-156 figures.

Of course, everything will depend on the flow of information. Repeated verbal interventions and/or confirmation of actual actions (even of an indirect nature), a decline in US yields—all these factors will exert strong pressure on the USD/JPY pair. In such a case, the pair will not only reach the target of 152.50 but may also try to go lower, down to the 150-figure.

But if the "radio silence" mode persists (previously, Japanese authorities only formally reported in statistical reports from the Ministry of Finance—weeks after currency intervention), then a corrective pullback may indeed follow. Note that despite the impulsive decline, the USD/JPY pair has not managed to break below the support level of 153.50, which corresponds to the lower boundary of the Kumo cloud on the D1 timeframe. If this mark is surpassed, the pair will be under the lower line of the Bollinger Bands on the daily chart and under the Kumo cloud, and the Ichimoku indicator will generate a bearish "Parade of Lines" signal.

In conditions of overall uncertainty, this price level looks like a support point—considering short positions is reasonable only after the bears overcome this price threshold (153.50). In such a case, the next target for the downward move will be the aforementioned mark of 152.50 (the Kijun-sen line on the weekly chart).