USD/JPY struggles near the highest levels since 1986 amid intervention fears
FUNDAMENTAL OVERVIEW
USD:
The US dollar has been supported following the hawkish Fed dot plot last week as the central bank’s tightening bias led to a hawkish repricing in interest rate expectations.
As a reminder, the Fed delivered a hawkish surprise by projecting a rate hike this year (the consensus was for no cuts or hikes). There are now 36 bps of tightening priced in by year-end. There's a 34% chance of a hike already in July and 68% probability of a move in September.
You can notice that there’s been a slightly dovish repricing in the last couple of days. One of the reasons could be the huge selloff in oil prices which have now reached pre-war levels. The other reason is that the hawkish repricing has now run its course and for more we will likely need upside surprises in the NFP and CPI reports.
Although the greenback should remain supported into the data, we might start to see some consolidation or even pullbacks if don’t get any meaningful catalyst before the key US data.
JPY:
On the JPY side, we started to see a few spikes recently as the USD/JPY pair reached the highest levels since 2024. It looks more like profit-taking near cycle highs than outright intervention given the size of the moves.
As a reminder, the BoJ hiked the policy rate to 1.00% as widely expected at the last meeting and announced the pause to the bond tapering programme from next fiscal year.
The forward guidance remained the same with the BoJ looking to continue the normalisation process, raising the policy interest rate and adjust the degree of monetary accommodation “in response to developments in economic activity and prices as well as financial conditions”.
BoJ’s Uchida didn’t offer anything new in the press conference reiterating the central bank’s willingness to raise rates further if economic conditions align. The divergence with the Fed will continue to keep the USD/JPY pair skewed to the upside until the US data starts to point in the other direction.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY continues to consolidate near the 2024 highs as it’s struggling to break through likely due to intervention fears. A break above the 161.95 level would take the pair to the highest level since 1986. We can expect the sellers to continue to step in around these levels with a defined risk above the 162.00 handle to position for a drop into the 158.00 support. The buyers, on the other hand, will look for a break to increase the bullish bets into new highs.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a minor upward trendline and a support zone around the 160.50 level. If we get a pullback, we can expect the buyers to step in around the trendline and the support with a defined risk below the support to keep pushing into new highs. The sellers, on the other hand, will need the price to break below the support to open the door for a potential correction into the 158.00 support next.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have another minor upward trendline that will likely act as support for now. The buyers will likely continue to lean on the trendline with a defined risk below it to keep pushing into new highs, while the sellers will look for a break lower to extend the pullback into the next trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we get the US Jobless Claims data and the US PCE report. Tomorrow, we conclude the week with the Tokyo CPI and the final University of Michigan consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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