USD/JPY climbs to three-month peak amid US Dollar strength

The USD/JPY currency pair surged to near three-month highs, hitting 151.79, driven by the strengthening US dollar and rising US government bond yields. The appreciation of the US dollar was supported by favourable macroeconomic data from the US and ongoing demand for safe-haven assets in anticipation of the upcoming US elections.

Japan's political landscape is uncertain as it approaches its general elections this weekend. Preliminary polls indicate that the ruling Liberal Democratic Party could potentially lose its majority, intensifying concerns over political stability and the future direction of the Bank of Japan's monetary policy. Such political uncertainties further diminish the prospects of the Japanese yen regaining strength against a robust US Dollar.

The current environment suggests that the Bank of Japan is unlikely to intervene effectively under these conditions. Market expectations are that any attempts at intervention would be futile against the prevailing strong demand for the dollar. The yen's fate now heavily depends on the outcome of Japan's elections and the subsequent actions of the Bank of Japan, particularly regarding interest rate decisions.

Technical analysis of USD/JPY

The USD/JPY has established a narrow consolidation range around 150.85 and has broken upwards, continuing its ascent towards the 152.52 target. Once this level is reached, a potential corrective move back down to 150.85 may occur, testing this level from above before another likely ascent to 152.72. The MACD indicator supports this bullish pattern, with its signal line well above zero and sharply upwards, indicating strong upward momentum.

On the hourly chart, USD/JPY has developed a growth structure towards 152.85. Following the achievement of this level, a corrective phase towards 150.85 is anticipated, with an initial correction target set at 151.70. The Stochastic oscillator further underscores this potential pullback, with its signal line positioned above 80 but poised to descend towards 20, suggesting an imminent downward adjustment before further gains.