USDJPY Nearing 2022 Highs Despite BOJ Tightening Talk

JPY Sell-Off ContinuesUSDJPY is trading at 11-month highs following early buying in the European session on Monday. The market is now fast approaching a test of the 2022 highs around 151.81. Despite speculation earlier in the year around potential BOJ intervention, the central bank has yet to take any actions to help strengthen JPY. Instead, in recent commentary the BOJ has signalled that it will patiently maintain its easing stance in order to keep the economy buffered. With the BOJ insistent on maintaining an easing stance, there appears little to deter JPY bears from staying short the currency for now.Keep an Eye on BOJHowever, with JPY shorts now highly stretched, it is worth proceeding with caution. We’ve heard recently from Japanese officials (both govt and BOJ) regarding FX moves and the need to monitor any excessive moves. Additionally, in the latest BOJ summary of opinions released today, we learned that the BOJ last month discussed the conditions for exiting monetary easing. March 2024 was earmarked as a crucial time for the bank to assess its policy and make any adjustments. Still for now that means USD has room to run further against the currency though we might well expected to some pushback if those 2022 highs are tested.Technical ViewsUSDJPYThe rally in USDJPY has seen the market pushing out above the top of the bull channel. With price now in touching distance of the 151.83 2022 highs it’s worth noting the bearish divergence we’re seeing in momentum studies, suggesting potential reversal risks. To the downside, 145 remains the key support to note with the bull trend intact while we hold above there.