USDJPY re-tests its YTD high, but there is little follow-through.

During the Asian session on Monday, the USDJPY pair reaches a new high since November 2022. But fails to profit on the slight increase over the mid-148.00s.

Fears of intervention, along with a lower risk tone, support the USDJPY and limit gains for the pair.

Japanese Yen (JPY) gains some support from speculation. That the Japanese government may interfere in the foreign exchange market to strengthen the domestic currency. As well as a softer risk tone. Indeed, Japan’s Finance Minister, Shunichi Suzuki, has issued a new warning. in response to recent JPY weakening, and stated. That the government will not rule out any alternatives for dealing with excess volatility in currency markets.

As a result, traders are hesitant to place new bullish wagers in the USDJPY pair, creating a headwind.

The Fed-BoJ policy divergence continues to favor bulls and enhances expectations for future gains.

The negative, however, is mitigated by a significant divergence. In the monetary policy stances of the Federal Reserve (Fed) and the Bank of Japan (BoJ).

The US Federal Reserve left interest rates constant at the end of its September policy meeting last Wednesday. As expected, but indicated a willingness to raise rates until inflation returns to its 2% objective. Indeed, the Fed warned that the US’s still-sticky inflation was likely to attract at least some attention. At least one more 25-bps lift-off is expected before the end of the year. Furthermore, the so-called ‘dot-plot’ predicted just two rate cuts next year. As opposed to four originally expected.

Furthermore, the forthcoming strong US macrodata should allow the Fed to hold interest rates higher for a longer period of time. As a result of the hawkish forecast. The yield on the rate-sensitive two-year US government bond has reached its highest level since July 2006.

Furthermore, the benchmark 10-year Treasury yield has remained stable at a 16-year high reached last Friday. This, in turn, helps the US Dollar (USD) maintain its position just below a more than six-month high. And lends support to the USDJPY pair. The JPY, on the other hand, is under pressure. As a result of the BoJ’s decision on Friday. From giving any hints about anticipated changes in its dovish position in the near future.

In the post-meeting news conference, BoJ Governor Kazuo Ueda stated. That the policy decision-making process has not changed and that the central bank does not expect inflation to reach the 2% objective in a consistent manner. As a result, the Bank of Japan will retain its ultra-easy monetary policy.

The aforementioned fundamental background appears to be strongly in favor of USDJPY bulls. As a result, in the absence of any important market-moving data announcements on Monday. Any meaningful corrective drop may still be viewed as a buying opportunity.