USD/JPY corrects sharply towards 1340.00, Japan’s intervention weighs

• USD/JPY corrects further towards 134.00 on Japanese verbal intervention.
• The US dollar, Treasury yields showcase unrelenting strength on recession fears.
• All eyes shift towards the Fed and BOJ for a fresh trading impulse in the pair.

USD/JPY is back in the red below mid-134.00s, having shaved off all of its gains seen so far this Monday.

Earlier on, the pair extended the ongoing uptrend and clocked fresh 20-year highs at 135.16, having faced rejection at the January 2002 peak of 135.16.

The renewed upside in the spot was triggered by spiking US Treasury yields across the curve, which drove the US dollar higher alongside. The yields, as well as, the dollar soared on intensifying fears over raging inflation and its impact on the US economy should the Fed opt for rapid and bigger rate rises to contain higher prices.

Further, widening monetary policy divergence between the Fed and the Bank of Japan (BOJ) also helped the yen smashing. The BOJ maintained its ultra-dovish rhetoric, backing its loose monetary policy for longer to support the economy.

Although the jawboning or the so-called verbal intervention by the Japanese authorities did save the day for JPY bulls. Japan’s Chief Cabinet Secretary Matsuno said that they are “ready to take appropriate actions on FX market movements if necessary.” Meanwhile, BOJ Chief Haruhiko Kuroda said that the recent decline in the yen is undesirable and that it is not good for the economy.

USD/JPY is extending its corrective slide following the verbal intervention, now down a big figure from over two-decade highs. At the time of writing, the pair is trading at 134.22, down 0.15% on the day.

 To help rescue the yen, the BOJ also offered to buy JPY 500 billion worth of Japanese Government Bonds (JGB) on June 14. All eyes now move towards the Fed and the BOJ policy decisions this week, which underscore the policy divergence between the two countries and determine USD/jPY’s next journey.

USD/JPY: Technical levels to consider