The dollar/yen pair plunged more than 500 points yesterday. In just a few hours the price fell from 160.73 to 155.58. Such a sharp intraday move was one of the largest in the past three years. In this case, the so-called "curse of the 160 level" kicked in again: breaking that mark is considered a red line that, as a rule, prompts a counterreaction from Tokyo.

That is exactly what happened this time. As soon as USD/JPY buyers pushed above the 160.50 resistance area (the upper line of the Bollinger Bands on the four-hour chart), Japanese authorities sharply stepped up their rhetoric. In particular, Finance Minister Satsuki Katayama said that "the time for decisive action is approaching." Although she refrained from mentioning specific timing for possible intervention, her hints were more than transparent (for example, she urged market participants not to put their smartphones away in the near term). Adding fuel to the fire, Vice Minister of Finance and chief currency diplomat Atsushi Mimura described the developments as a final warning to speculators.

After those remarks, the market began mass liquidations of long USD/JPY positions. This process accelerated when major media outlets (notably Reuters and Nikkei) reported that the Ministry of Finance and the Bank of Japan had moved from words to action and had in fact carried out a coordinated operation to buy yen and sell dollars. In other words, Japanese authorities executed their first currency intervention since 2024.

Yesterday's volatility was amplified by the official start of Japan's so-called Golden Week, a series of national holidays, which reduced domestic market liquidity. For example, on 29 April Japan marked Showa Day, the birthday of the late Emperor Hirohito. Japanese banks and the Tokyo Stock Exchange were closed, and, with activity from Japanese participants reduced, liquidity in USD/JPY was significantly below normal.

Incidentally, one theory holds that the Ministry of Finance purposely chose a holiday to intervene, because on a thin market even relatively small currency injections can cause a much sharper and deeper price move than on a normal trading day. The situation allowed the regulator to push USD/JPY below key technical levels without serious resistance from dollar bulls.

It should be noted that Golden Week continues in Japan through 5 May inclusive, so the Japanese interbank market will operate in a limited fashion in the coming days. On such a thin market any repeat actions by Japanese authorities, or even intensified verbal interventions, could trigger new sharp moves in USD/JPY.

Given today's price retracement (buyers have managed to return to the 156 area, recovering part of the lost ground), it is worth recalling that the Japanese regulator often acts in series in such situations in order to consolidate the success of the first "attack" and convince the market of the seriousness of its intentions.

For example, in 2022 Japanese authorities executed a multistage operation: on 22 September they carried out the first round of intervention after the pair had moved into the 145 area. The rate plunged sharply but only briefly — buyers seized the opportunity and began to open long positions en masse, driving the pair back up toward the 152 area. Reacting to that situation, Japanese authorities launched a second attack—waiting until Friday evening, 21 October (when it was already night in Japan and liquidity in the West was diminishing), they intervened again, collapsing the rate from 152.00 to 146.50. And just two days later, on 24 October, Tokyo delivered a finishing blow. A third wave of dollar selling followed on Monday morning, preventing traders from buying the dip. That sequence allowed Japanese authorities to turn the trend for several months. In January 2023, USD/JPY updated its multi-month low near the 127 level. Naturally, other fundamental factors contributed, but Japanese regulators played a significant role.

All of this means that northward retracements in USD/JPY are highly unreliable and risky. Corrective spikes should be used as opportunities to open short positions, with initial targets at 156.00 (the lower line of the Bollinger Bands on the four-hour chart) and 155.50 (the lower border of the Kumo cloud on the daily chart).