Recently, USD/JPY has been on my watch list, and from a technical perspective, it’s quite interesting. USD/JPY recently broke through 158.50, and the market is now focusing on the 159.00-159.50 zone. I looked at the chart, and the 50-day moving average is at 156.80, while the 200-day moving average is at 153.20, both below the current price. This setup still looks quite bullish. The RSI is approaching 68 but has not shown clear divergence yet. In the short term, 157.50 and 156.80 are two key support levels.

Interestingly, there have been ongoing rumors of intervention from Japan. It’s said that officials from the Ministry of Finance are ready to act at any time, but I think this is more of a psychological tactic. Historically, in 2022, they intervened at 152.00, spending about $62 billion. The current issue is that the interest rate differential between the US and Japan remains above 500 basis points. The Federal Reserve maintains rates above 5%, while the Bank of Japan has started normalizing but remains very cautious. Such a large spread supports the continued strength of USD/JPY.

Fundamentally, Japanese investors are still buying US Treasuries for yield, and foreign interest in Japanese assets is relatively low, which sustains ongoing demand for the dollar. Plus, recent geopolitical tensions have increased risk aversion, further supporting the dollar. Looking at options market data, the risk reversal indicates that the premium for bullish USD options remains relatively high. The market prices in about a 30% probability of intervention within a month, but considering the low likelihood of coordinated action, I believe unilateral intervention would have limited effect.

The minimal resistance path for USD/JPY still appears to be upward. Unless the Bank of Japan suddenly turns hawkish or the G7 truly coordinates intervention, the short-term downside seems limited. If it breaks through 160.00, it could quickly surge toward 162.00. Conversely, if it falls below 156.80, then it will depend on whether 155.50 can hold.