The USD/JPY pair surged to a new multi-decade high above the 160 level on Wednesday, signaling a strong bullish momentum in the market. Despite concerns about potential intervention from Japanese authorities to support the weakening yen, buyers continued to push the pair higher.
One of the key indicators of the strong buying interest was the breach of the psychological barrier at 160, which typically attracts a high volume of bids. Additionally, the long tails of the May and June monthly candles indicated robust support for the pair at these levels.
The divergence in monetary policies between the Federal Reserve and the Bank of Japan also played a role in supporting the US dollar. The Fed’s hawkish stance contrasted with the BoJ’s more dovish approach, creating a favorable environment for the dollar to appreciate against the yen.
Although the USD/JPY pair was in overbought territory on the daily chart, bulls seemed undeterred as they pushed for a close above the 160 level. A successful break above this level could open the door for further gains towards the Fibonacci projections at 162.16 and 163.38, with a potential target at the 164.00 level, last seen in October 1986.
Rumors circulating about the Japanese authorities considering intervention around the 170 zone could provide additional fuel for the bulls to sustain the upward momentum above 160. This speculation added to the positive sentiment surrounding the pair and encouraged investors to keep buying.
In terms of support levels, the initial floor was expected at 160.00, followed by 159.60, which marked the day’s low and the 5-day moving average. Further downside protection was seen at the rising 10-day moving average at 158.64, preventing any sharp declines in the near term.
Looking ahead, resistance levels were identified at 161.00, 162.16, 163.38, and the key level of 164.00. On the other hand, support levels included 160.00, 159.60, 158.64, and 157.70, forming a range within which the pair was expected to trade in the coming sessions.
Overall, the bullish trend in the USD/JPY pair reflected the prevailing market sentiment favoring the US dollar over the Japanese yen, driven by a combination of fundamental factors and technical considerations. Traders would closely monitor any developments in the currency pair to capitalize on potential trading opportunities arising from these dynamics.