With the influence of the US dollar holding strong in the near or medium term, USD/JPY rallied forcefully to a high of 157.147 in the wake of a hawkish Federal Reserve outlook and a hold on interest rates by the Bank of Japan (BoJ).
Although the Japanese yen appears undervalued against its G-10 counterparts, the potential for higher US yields and unwillingness of the BoJ to raise its interest rates sets the stage for ongoing upward pressure.
The yen’s rapid decline in the past week toward 155 against the dollar has strategists warning that further weakness may trigger verbal intervention from authorities and add pressure on the BOJ to hike interest rates https://t.co/3uBHM36N64
This suggests that a higher trading band for USD/JPY may persist, with market participants bracing for elevated volatility should the pair approach the 160 mark, a zone where Japanese authorities intervened earlier in the year with close to $100 billion of reserves.
USDJPY Technical Analysis
Early trading hovered near 154.63, but bullish momentum pushed the pair sharply higher, touching an intraday peak at 157.147, before settling close to 156.95.
Picture: USDJPY surged exceeding 156.95 as bullish momentum intensifies, as seen on the VT Markets app.
The 15-minute chart shows a smooth upward trajectory, supported by a rising moving average and a strong MACD reading that points to sustained buying interest.
USD/JPY Surges on Fed Hawkishness
The policy divergence is clear. The Fed’s hawkish signals have reinforced market expectations for a stronger dollar, while the BOJ’s reluctance to tighten policy has left the yen vulnerable.
As traders watch the interplay between US monetary policy and Japan’s hands-off approach, any signs of adjustment from the BOJ may influence future price action.
For now, the path of least resistance favours the dollar, keeping yen bears active and testing the resolve of Japanese policymakers.
