USD/JPY continues to poke and prod at intervention strike zone

It's been twice now that the pair has hit 159.99 today before pulling back just a little bit. Since the second week of May, it has been one-wary traffic for USD/JPY in moving back up to near the 160.00 mark. Despite intervention from Japan's ministry of finance, the path of least resistance remains higher for the pair. That especially since the US-Iran conflict continues to drag on.

The BOJ being dealt a blow on a more messy inflation picture in wanting to raise interest rates. The Japanese economy being dragged down into the mud as energy prices soar, with no clear indication of when things might improve. Fiscal worries are mounting further as the government needs to issue more debt to fund subsidies. All that while the Takaichi trade was already, and still is, running in the background since last October.

Tough times.

At this juncture, it's all a psychological game. USD/JPY traders know very well that Japan will feel compelled to intervene if they are to cross the 160.00 level. Tokyo officials will need to do so even if it just to send a message to markets. Otherwise, it will invalidate everything that they have done since the end of April and will make them look "weak".

That being said, not intervening also risks the same effect especially if they let price action run too far up from here. So, we can only wait and see what they will want to do.