Intervention fears are capping the USD/JPY upside as traders await the key US data

FUNDAMENTAL OVERVIEW

USD:

The US dollar has been supported since the last FOMC decision as the more hawkish than expected dot plot led to a quick repricing in interest rate expectations with traders increasing rate hike probabilities.

There is now 32 bps of tightening priced in by year-end. There's a 29% chance of a hike in July and 62% probability of a move in September.

There’s been a slightly dovish repricing in the last few 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 might have reached a near-term peak 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 we don’t get any meaningful catalyst before the key US data.

JPY:

On the JPY side, nothing has changed. 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 and waiting for new catalysts rather than outright intervention given the small 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 is still consolidating near the 2024 highs as intervention fears are probably capping the momentum. 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 defining the bullish momentum. If we get a pullback, we can expect the buyers to lean on the trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to extend the pullback into the 160.50 support zone.

USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, there’s not much we can add here as the price action remains rangebound. The only two key levels in the near-term are the 161.95 resistance and the trendline. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Tomorrow, we get the US Job Openings data and the US Consumer Confidence report. On Wednesday, we have the US ADP report and the US ISM Manufacturing PMI. On Thursday, we conclude with the US NFP report, and the US Jobless Claims figures.