USD/JPY rallied forcefully in the wake of a hawkish Federal Reserve outlook and a hold on interest rates by the Bank of Japan (BOJ).
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 surging higher, 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.
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.
The dollar’s influence is unlikely to wane in the near or medium term, so USD/JPY could explore the 158/160 region, a zone where Japanese authorities intervened earlier in the year with close to $100 billion of reserves.
Although the yen appears undervalued against its G-10 counterparts, the potential for higher US yields and a BOJ unwilling to raise rates sets the stage for ongoing upward pressure.
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.
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.
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