Yen investors are now on alert and preparing for the risk of currency intervention by Tokyo which is expected to erupt anytime on Monday.
The London and New York markets will be closed on Monday, May 25, 2026 due to a public holiday, this extreme lack of liquidity will become a bloody battlefield.
The market atmosphere is filled with anxious emotions, as if a big shark is waiting for the time to do a 'hit and run' as soon as the closing bell of the Tokyo trading session rings.
Tokyo's Classic Trap Lurks Traders
Experience teaches us that holidays are the most favorite time for the Japanese Ministry of Finance (MOF) to attack.
It is still fresh in the memory when Tokyo shocked the market by burning nearly ¥10 trillion during the Golden Week holiday last month. When the London and New York markets are closed this Monday, the absence of major market players will cause any movement in the USD/JPY price to be very 'volatile' and uncertain.
The MOF may take this golden opportunity to dump the Dollar into the market just before the Tokyo counter closes. This situation has made traders defensive and hesitant to hold long positions in USD/JPY excessively.
The pressure is increasing as Prime Minister Sanae Takaichi is pushing for the introduction of a supplementary budget that will increase government spending. This combination of domestic factors is destroying the fundamental value of the Yen, forcing investors to dump the currency wholesale, and creating a continuous downward momentum.
Speculation of a BOJ Rate Hike This June
The wide interest rate gap between the hawkish Fed and the Bank of Japan (BOJ) is starting to gain attention as the futures market (OIS) shows an 83% probability of a BOJ rate hike in June.
This BOJ speculation has attracted many investors to accumulate long positions in the Yen, expecting the 160 zone to be the best discount price before intervention or aggressive action by the BOJ erupts.
