**USD/JPY Analysis: Dollar Surge to New 34-Year High on Persistent Yen Weakness**
*Adapted from the original article by MiTrade Insights | Supplemented by broader forex market analysis*
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## Overview: Dollar Bull Run and Yen Decline
The foreign exchange market witnessed significant volatility recently as the US dollar soared to its highest point against the Japanese yen since 1990, surpassing the symbolic 160 level. This strength in the dollar is attributed to persistent divergence between monetary policies of the US Federal Reserve and the Bank of Japan (BOJ), as well as robust American economic data. Meanwhile, traders are closely monitoring the prospect of intervention by Japanese authorities to stabilize their currency.
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## Key Factors Driving USD/JPY to 160
### 1. **Policy Divergence: US vs. Japan**
– The Federal Reserve has signaled a stance of “higher for longer” on US interest rates due to persistent inflation and a strong labor market.
– In contrast, the Bank of Japan remains committed to its ultra-loose monetary policy, even after recently ending its negative interest rates and yield curve control regime.
– The continued gap in yields between US Treasury securities and Japanese government bonds (JGBs) makes the dollar an attractive investment, fueling longstanding yen weakness.
### 2. **Japanese Economic Fundamentals**
– Despite marginal increases in rates, the BOJ has maintained a cautious approach, resulting in limited appreciation of the yen.
– Japan faces challenges, including sluggish wage growth, tepid inflation expectations, and concerns over sustained economic recovery post-pandemic.
– These domestic headwinds have limited the BOJ’s flexibility, pushing global investors away from the yen.
### 3. **Safe Haven Flows and the Carry Trade**
– Traditionally, the yen is regarded as a safe-haven asset. However, with global risk appetite strengthening and investors favoring higher-yielding assets, the incentive to hold yen has diminished.
– The carry trade, where investors borrow in low-yielding currencies like the yen and invest in higher-yielding assets elsewhere, has intensified these moves.
### 4. **Market Reaction and Potential Intervention**
– The breach of the 160 level is psychologically significant and triggers memories of past interventions, such as Japan’s sizable currency market intrusions in 2022.
– Market participants are alert for signs of Japanese authorities stepping in to prop up the yen, though such interventions may only provide temporary relief unless underpinned by policy change.
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## USD/JPY Technical Analysis
### Key Resistance and Support Levels
– **Major Resistance:** 160.00 (historical high, psychological barrier)
– **Intermediate Resistance:** 161.00 and 162.00 (projected extension levels if momentum persists)
– **Immediate Support:** 158.00 (recent consolidation area)
– **Major Support:** 155.00 (previous high before latest surge)
### Momentum and Sentiment
– Technical indicators (e.g., Relative Strength Index,
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