USD/JPY extended its year-long grind on Monday, rising from about 161.50 in early Asian trade to just under 162.50 by London afternoon before easing through New York to finish a little above 162.00, within a big figure of last week’s cycle high just shy of 163.00. Broader Dollar price action was subdued, yet the Yen still weakened by 71 pips and is trading around levels last seen roughly 40 years ago. Japan’s previous intervention campaign remains the reference point: authorities spent close to ¥12 trillion, or about $73bn, buying Yen across April and May, but the latest push higher has come without accompanying official commentary.
The Finance Ministry has dropped verbal warnings, declined to endorse any explicit trigger such as 162.00, and is reported to prefer action tied to the build-up of speculative short positions. The BoJ lifted its policy rate to 1.00% on June 16, the first move above that level in three decades, but the Yen firmed for only about a session; with policy still described as accommodative, real rates negative and the next hike seen in Q4, the gap to a Fed holding at 3.75% keeps the carry trade supportive. Key events include May Labour Cash Earnings at 23:30 GMT with consensus 3.4% YoY versus 3.5% prior, Japan’s current account at 23:50 GMT Tuesday expected above ¥4trn, and FOMC minutes at 18:00 GMT Wednesday. Levels in focus are resistance at 162.50 then just under 163.00, and support at 162.00, 161.50, 161.00, and the 50-day EMA just above 160.00.
Yen Weakness and the Policy Backdrop
We see the USD/JPY pair hovering near the 164.50 mark, continuing its relentless climb from earlier in the year. The broader Dollar index is largely unchanged, confirming this remains a story of persistent Yen weakness. The currency is being sold against everything as traders chase yield differentials.
The Ministry of Finance has remained strategically silent, a tactic we now understand precedes an ambush rather than a telegraphed warning. They are likely watching the buildup of speculative shorts, with recent CFTC data showing these positions have swelled to levels last seen just before the massive ¥12 trillion interventions of 2024. This quiet period is a deliberate choice to keep traders off-balance.
The Bank of Japan’s hike back in June provided only a few hours of Yen strength before the trend resumed. With Japanese real rates still deeply negative, that single move has done little to alter the powerful carry trade arithmetic. All eyes are now on this week’s US CPI data, which is forecast to keep the Federal Reserve on hold at 3.75% and reinforce the wide interest rate gap.
Trading Strategy and Technical Outlook
For the coming weeks, we believe buying USD/JPY call options is the prudent strategy to maintain bullish exposure. This approach allows participation in further upside toward the 165.00 level and beyond, while strictly defining risk in case of a sudden intervention. Selling out-of-the-money puts can also generate income from the bullish trend, but it carries significantly more risk from a sharp reversal.
Key resistance is the recent high near 165.00, a level the market is keen to breach and explore uncharted territory above. We see initial support at the 164.00 mark, with a more significant floor down at 163.50, which has served as a launchpad for recent moves. The trend remains valid as long as we hold above the 50-day moving average, currently near 162.80.
