USD/JPY

With the BoJ holding rates below 1% and the Fed on hold under Chair Warsh, the structural USD-JPY rate differential remains the dominant force driving yen weakness toward the 40-year high at 162.84 — a clean break would open the door to 164.50+.

USD/JPY is coiling just beneath the 40-year high of 162.84 with price action tightening, raising the probability of a breakout to fresh multi-decade highs above the 163.00 round-number barrier.

Main Risk

BoJ Surprise Rate Hike or FX Intervention

The BoJ has recently sent fresh verbal intervention warnings; an unscheduled rate hike or coordinated MOF-BoJ FX intervention could cause a 200–400 pip flash reversal similar to the September 2022 and October 2022 episodes.