BOJ Intervention Risks Grow As USDJPY Tests 145

USDJPY Testing Key LevelUSDJPY is on watch this week as the pair retests the 145 level. This area has been touted as a line in the sand for the BOJ and should USDJPY continue to move higher, risks of fresh BOJ intervention grow stronger. This is the area where the bank stepped in last year with massive FX reserve selling of USD to drive the pair lower. Subsequently, prior retests of the level this year have seen strong selling kick in to take the pair lower.BOJ Policy on WatchThe BOJ recently widened the band on its YCC target, allowing for JGB yields to rise as high as 1%. The move was seen as potentially laying the groundwork for a shift in monetary policy. However, with the BOJ reaffirming its commitment to maintaining an easing stance, JPY has continued to weaken. At the same time, USD has been trading higher recently with traders sensing that the Fed might not yet be done tightening.Hawkish Fed Risks RemainRecent hawkish comments from some Fed members have seen pricing for a further hike by year end creeping back up. In light of recent action at the level, USDJPY looks vulnerable to a downside shock if we continue higher here. However, until such time as the BOJ lifts interest rates JPY remains vulnerable to further weakening long-term.Technical ViewsUSDJPYThe rally in USDJPY has seen the market trading back up to test the 145 level and the bull channel highs. This is a major resistance level for the pair and should we break higher here, the path is open for a move higher towards 151.81 next. Should we correct lower from here, however, focus shifts to 142.21 next and 138.03 and the channel lows below.