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UOB strategists Quek Ser Leang and Peter Chia highlighted a robust rally in the USD/JPY pair, which surged to nearly 159.00, driven by elevated US Treasury yields. They noted intraday potential for a test of the 159.45 level but cautioned that overbought conditions could hinder further gains. The pair’s strength reflects broader dollar demand amid tighter US monetary policy and a weaker yen, which has struggled against inflation-linked yield differentials. For traders, the USD/JPY’s proximity to key resistance levels raises questions about sustainability. Overbought technical indicators suggest a possible pullback, though a break above 160.00 could reignite bullish momentum. The pair’s performance will also influence cross-currency flows, particularly for EUR/USD and AUD/USD, as investors adjust positions in response to shifting risk appetite. Looking ahead, market participants should monitor US Fed policy signals and Japanese inflation data for clues on the yen’s trajectory. A sustained move beyond 160.00 would signal a shift in risk sentiment, while a reversal below 158.00 could trigger a retest of 155.00. Traders are advised to balance short-term volatility with longer-term macroeconomic trends.
