The USDJPY raced higher today with the pair moving closer to surpassing the September 1998 high at 139.91 (the high reached 139.384 today so far - see monthly chart above). The 1998 high by the way reached up to 147.67. So there is room to roam, but trading at 24 year highs is still pretty lofty levels for the USDJPY pair.
The spread between US and Japan policy continues to be the driving force for the pair as the Fed may look to 100 basis point rise at the July 27 meeting while the BOJ is keeping rates steady.
Also helping are the technicals (by definition - they help to confirm the story and give bullish and bearish clues).
Looking at the hourly chart, on Monday, there was a move above the June high at 136.99. On Tuesday, the price fell back below that level, but found support ahead of the rising 100 hour moving average. Holding that level kept the buyers more in control. Yesterday the price action was volatile up and down with the CPI, and the failure to materially extend above the Monday high hurting the bullish sentiment. However what was significant from a technical perspective is the dip lower held above the aforementioned June high at 136.99 the post CPI low moved down to 137.09. Stay above, kept the buyers in play and in control.
In the early Asian session, the price was able to extend above the Monday high and stayed above that level (at 137.742). The momentum continued and the price has since moved above a topside trend line on the hourly chart. That trend line currently comes in at 138.679 and represents a close risk level. Having said that breaking below would still have to move below the 38.2-50% of the last trend leg higher between 137.924 and 138.269 to give sellers more confidence.
The dollar is on fire and the USDJPY is leading the way. Japan is a big trading partner and the higher USDJPY will weigh on multi-nationals as a result. PS the EURUSD is certainly not helping either for those companies. With the BOJ intent on keeping the pedal to the metal, the relief has to come from the US inflation spiral breaking and the Fed slowing its need to break the back of inflation. Lower stocks, higher rates, may break the back but at the cost of a recession. The yield curve inversion is saying that will happen.
