USD/JPY continued to trade near recent highs, OCBC strategists Frances Cheung and Christopher Wong note.

Intervention is inevitable

“USD/JPY continued to trade near recent highs. This is also near the highest level since 1986. There are expectations that Japanese authorities could soon intervene. While the level of JPY is one factor to consider, officials also focus on the pace of depreciation as the intent of intervention is to curb excessive volatility.”

“That said, if realised vols start to pick up or USD/JPY sees a rapid move towards 164-165 (from current spot), then actual intervention can potentially materialise. In the interim, USDJPY will look to UST yields, USD for directional cues. For USD/JPY to turn lower, that would require the USD to turn/Fed to cut or for BoJ to signal an intent to normalise urgently (rate hike or increase pace of balance sheet reduction).”

“USD/JPY continued to trade near recent highs. The path of least resistance for USDJPY may still be to the upside, for now. Pair was last at 160.90. Bullish momentum on daily chart intact while RSI in in overbought conditions. Next resistance at 161.20 (138.2% fibo projection of 2023 low to 2023), 164 levels. Support at 157.70 (21 DMA), 156.60 (50 DMA).”