Synopsis:

Goldman Sachs highlights recent market activity suggesting another suspected intervention by Japanese authorities in the USD/JPY exchange rate following the Federal Reserve's latest FOMC meeting. The aim was seemingly to capitalize on post-meeting USD softness and market illiquidity.

Key Points:

• Timing and Scale of Intervention: The intervention reportedly occurred late in the London session, around 9:15-9:45 PM, with approximately $33 billion USD transacted during this period. Goldman estimates that roughly 70% of these transactions were executed by the Ministry of Finance (MoF) and Bank of Japan (BoJ), driving USD/JPY from 157.50 down to 153.00 before it settled around 154.70.

• Market Reaction: Following the suspected intervention, there was significant buying activity from retail and macro traders, exploiting the dip. This buying pressure helped push the pair back up to the 155.50-156.00 range as the European markets opened the following morning.

• Ongoing Intervention Strategy: The interventions have continued throughout the week, with this being the fourth wave. Despite these efforts, USD/JPY levels have returned to those seen at the week's start, leading to questions about the long-term efficacy of Japan's intervention strategy against the backdrop of broader macroeconomic factors.

• Volume and Market Sentiment: Trading volumes were slightly above average in the Asia session following the intervention, normalizing later but again picking up as London trading began. The persistent market willingness to "lean into" these interventions suggests a robust challenge to Japan's efforts given the current macroeconomic environment.

Conclusion:

Goldman Sachs' analysis of the suspected interventions in the USD/JPY market post-FOMC reveals a complex interplay between Japanese policy actions and market forces. While the immediate effects of the interventions have temporarily influenced exchange rates, the overall effectiveness remains under scrutiny as the market continues to test these interventions against prevailing global economic conditions.