USD/JPY has extended today's gain to 188 pips, hitting 142.50.
On the technical side, there isn't anything standing in front of the pair until the 1998 high of 147.63.
The catalyst for today's gains is a rise in Treasury yields with rates up 5-9 bps across the curve. Interestingly, Fed fund futures implied probabilities of a 75 bps hike have drifted down to 69% from 75% on Friday.
The short term risk is equities as the strong implied open of a few hours ago has faded. S&P 500 futures are up just 13 points from +30 earlier. At the same time, the correlation between stocks and USD/JPY has broken this year.
The bigger picture catalyst for the pair is monetary divergence with the Fed hiking and the BOJ stridently committed to yield curve control. The big risk is that the BOJ pulls out the rug of inflation becomes problematic. There's also some risk of intervention as jawboning has picked up but it's also notable that the yen is still within the 10-year range against most other currencies, including EUR, AUD and GBP.
For now, the trend is your friend. USD/JPY has had a spectacular move but until something changes, the momentum will continue.
