USDJPY: Elevated on Yield Divergence, But Intervention Risks Loom

Summary – USDJPY

• Current Price: Hovering near 156.50–157.00
• Immediate Resistance: 158.00 (psychological + MoF intervention trigger)
• Support Levels: 152.50 (recent swing low), followed by 150.90 (former breakout zone)
• Momentum: Bullish, but overextended; RSI divergence may signal exhaustion near 158.00

USDJPY continues to trade near multi-decade highs, driven by widening U.S.-Japan yield spreads. However, traders must respect the MoF's historical pattern of intervening once the pair tests or breaches the 155–160 danger zone. A clean break above 158.00 could trigger aggressive yen-buying or increased verbal jawboning.

Fundamental Drivers

United States – Fed Delays, but Doesn't Deny Cuts

• Fed held rates steady at 5.25–5.50% in May.
• April payrolls beat expectations, and services inflation remains sticky, pushing market bets for the first rate cut to September or later.
• U.S. 10-year yields remain elevated, directly supporting USDJPY as interest rate differentials widen.

Japan – BoJ Tightens Slowly, Watching Data

• BoJ ended negative rates in March but remains measured at a tightening pace.
• Strong spring wage agreements and inflation stickiness could push the BoJ toward a follow-up hike in July.
• BoJ rhetoric emphasizes financial stability, limiting near-term JPY bullish catalysts unless external triggers emerge.

MoF/FX Intervention – Growing Market Sensitivity

• The Ministry of Finance (MoF) has a track record of intervening when USDJPY breaches 155–160, particularly amid speculative surges.
• Late April's suspected intervention saw a sharp 500+ pip reversal intraday.
• Any verbal warnings or actual yen-buying could spark extreme volatility.

Risk Sentiment & Bond Yields – Core Drivers

• Strong U.S. data → higher yields → bullish USDJPY
• Risk-off mood (e.g., equity drop or geopolitics) → safe-haven yen strength
• Japanese investors repatriating assets could also provide downside pressure on USDJPY.

USDJPY – D1 Timeframe

The position and array of the 100 and 200-period moving averages on the daily timeframe chart of USDJPY readily point to the bearish trend. The resistance trendline adds credible confluence, with an FVG and inducement. We must follow the bearish sentiment since the market structure agrees with the confluences.

USDJPY – H4 Timeframe

On the 4-hour timeframe chart of USDJPY, we see in much clearer detail the bearish outline of the market structure and the SBR pattern whose supply zone rightly intersects the resistance trendline. In the meantime, however, I advise caution as we await further confirmation based on a shift in market structure in favor of the bears.

Analyst's Expectations: 

Direction: Bearish

Target- 141.900

Invalidation- 151.695

CONCLUSION

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