USDJPY Jun 03 to Jun 07 Outlook

Recap
Bounced off Y-1 area in the beginning of the week but failed to clear Y-0. Dropped to below Y-1. As expected Japnese government intervened. Closed the week at week low and below Y-1.

Outlook
Heavy intervention means short term support resistance levels will not be honoured. Ninja was supposed to drop to Y-2 and that did not happen. What we got last week was not consolidation action but an attempt to force a bottom in place so that ninja can go much higher.

Only until the media reported that ninja at 102 and below is necessary to keep the major Japanese corporations happy that BOJ and Japanese government changed their tune of further crashing yen.

Now it becomes a dilemma that the Japanese officials cannot resolve. Keeping ninja in 100 to 102 with a goal of much higher Nikkei is very difficult to do.

Thus if Ninja can resume its rally back up to above 104, it will spin out of control and zoom to 108 and higher while Nikkei crash all the way back down to the pre-intervention level. Temporarily, during the melt up in ninja, Nikkei may recover somewhat from current level but it will not last. This is what government intervention does all the time – you get the worst outcome in everything they thought they understand.