Synopsis:
Credit Agricole delves into the recent movements in the USD/JPY and EUR/JPY currency pairs, shedding light on the potential actions (or non-actions) of Japan's Ministry of Finance (MoF) regarding foreign exchange intervention. The bank also highlights its stance on EUR/JPY based on its FAST FX model.

Key Highlights:

1. USD/JPY's Volatility:

• Within the last four trading sessions, the USD/JPY has witnessed two sharp declines.
• The first significant dip happened on 29 September during the latter part of the Asian trading session.
• A second pronounced dip occurred in the New York trading session when USD/JPY surged past the crucial 150 technical level, driven by robust US JOLTS job openings data.

2. Japanese Officials and FX Intervention Speculation:

• Neither Shun’ichi Suzuki, Japan’s Minister of Finance, nor Masato Kanda, the Vice Minister of Finance for International Affairs (also known as the FX Tsar), have confirmed the Bank of Japan's potential involvement in FX market intervention.
• Kanda, in particular, stated that he would not comment on the possibility of foreign exchange intervention.
• Both officials have consistently emphasized their keen observation of the foreign exchange market, expressing readiness to counteract excessive FX fluctuations.

3. Awaiting Official Confirmation:

• Without any official affirmation from the MoF regarding FX intervention, the market will likely remain in a state of anticipation until the MoF releases its monthly Foreign Exchange intervention report in early November.
• The strategy of maintaining ambiguity around intervention activities effectively deters traders from pushing USD/JPY excessively upwards due to concerns of potential intervention from the Bank of Japan, thereby conserving Japan's FX reserves.

4. Credit Agricole's Position on EUR/JPY:

• Based on Credit Agricole's FAST FX model, the bank retains a short position on EUR/JPY for the current week. They target a shift towards their short-term fair-value estimation for the EUR/JPY cross, which stands at 153.83.

Closing Thoughts:
Credit Agricole emphasizes the complexity surrounding the potential foreign exchange intervention by Japan's officials and the inherent market uncertainty that this stance creates. While market participants remain vigilant of possible interventions, the bank maintains its quant position on EUR/JPY, informed by their proprietary model.