The US data continues to surpass expectations, resulting in a significant shift in the market's outlook for interest rates. As a result, investors have begun to price in a more hawkish stance, as Federal Reserve members repeatedly emphasize that the possibility of two or more rate hikes cannot be dismissed if the data continues to show strength.
Conversely, the Bank of Japan (BoJ) remains committed to its loose monetary policy, which has contributed to the weakening of the Japanese yen (JPY). Although there are some indications that the BoJ might make adjustments to its Yield Curve Control (YCC) policy at the upcoming meeting, the central bank has consistently disappointed markets for an extended period of time.
In summary, the US economy's positive performance has led to increased expectations of interest rate hikes, while the BoJ's persistent loose monetary policy has resulted in a weaker JPY. Although there are faint suggestions that the BoJ may make changes to its YCC policy, the central bank's track record of underwhelming market participants has created skepticism.
On the daily chart, USDJPY displays a remarkable upward momentum, exhibiting a relentless ascent with minimal pullbacks. This robust rally can be attributed to the market's recalibration of interest rate expectations in response to the consistently positive surprises in US economic data. Furthermore, the breach of the resistance level at 142.17 has effectively paved the way for a potential surge towards the 150.00 mark, as there are no prominent barriers in sight that would impede the currency pair's ascent before reaching that milestone.
Examining the 4-hour chart, it becomes evident that the ongoing rally receives substantial backing from the moving averages, which act as support levels as buyers strategically position themselves for additional upward movement. As the price currently retraces towards the red 21 moving average and the trendline, it is highly likely that buyers will once again intervene to drive the price higher. Conversely, for sellers to gain momentum, they would need to witness a decisive breach of the trendline, indicating a potential larger pullback towards the now-turned-support level at 142.17 resistance.