EUR – U.S. and Japan coordinate intervention in the weak yen, causing a sharp drop in the dollar

The dollar declined significantly last week, initially pressured by unexpectedly dovish signals from the Federal Reserve, and then triggered by related yen intervention, leading to a massive sell-off. Reports indicate that Japanese officials bought yen and sold dollars on a large scale in the New York market on Thursday. On Friday, the U.S. and Japanese authorities intervened simultaneously to support the yen. Sources say that Japanese authorities directly sold dollars and bought yen during the New York session, while the Federal Reserve Bank of New York, on behalf of the U.S. Treasury, sold euros and bought yen; this coordinated bilateral action is the first of its kind in nearly 30 years. It is said that the New York Fed contacted at least two major U.S. banks to inquire about euro/yen quotes in preparation for the intervention. Media reports later indicated that the U.S. Treasury Secretary's handwritten to-do list during the Camp David cabinet meeting included "buying $5 billion to $10 billion in yen," further confirming the planned nature and expected scale of the intervention. This joint intervention marks a significant shift in the US stance towards a strong dollar, and the direct U.S. intervention greatly enhances its credibility and deterrent effect.

This week's market focus will shift to Friday's U.S. non-farm payroll data. If the labor market remains resilient or the slowdown in inflation stalls, it could increase pressure on the Federal Reserve to strengthen its anti-inflationary stance.

Technically, the euro has broken above its 25-day moving average against the US dollar. If it can hold above this level, the euro is expected to continue its upward trend. The next target is the year-to-date downtrend line at 1.1550, followed by resistance at 1.1620, with key levels at 1.18 and even 1.20. Nearby support is initially seen at 1.1430, followed by 1.1320-50. A clear break below these levels could lead to another downward move for the euro, with support at 1.1260 and then 1.12.

Forecast range:
Resistance: 1.1550* - 1.1620 - 1.1800 – 1.2000*
Support: 1.1430 - 1.1320/50* – 1.1260 - 1.1200

Key Focus:
Monday: Eurozone July Manufacturing PMI (16:00)
 

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