USD/JPY is pressing toward 40-year highs, trading around 162.20 on Monday as it climbs for a second straight day above its key moving averages. Analysts point to Japan's debt load and a huge interest rate differential as forces keeping the pair pointed higher despite Bank of Japan intervention.
USD/JPY trades around 162.20 during the early European hours on Monday, gaining ground for a second successive day. The pair holds comfortably above both the nine-day and 50-day Exponential Moving Averages, which slope upward and suggest sustained underlying demand.
The 14-day Relative Strength Index sits around 62, keeping the pair in positive territory without yet signaling overbought conditions. That reading hints buyers still retain control despite the recent pullback from the highs.
The pair remains within an ascending channel, a pattern that suggests a prevailing bullish bias. Initial resistance lies at the 40-year high of 162.84, reached on July 1, followed by the upper channel boundary around 163.40.
On the downside, the pair may pull back toward the nine-day EMA of 161.76. Further declines could test the lower channel boundary near 160.80 and the 50-day EMA at 160.23, with a break below that zone exposing the four-month low of 155.04 recorded on May 6.
Beyond the charts, structural pressure weighs on the yen. DailyForex analyst Christopher Lewis argues that Japan's large debt cannot be serviced with high rates, a view that keeps him leaning toward higher levels over the long run.
The Bank of Japan intervened over the last couple of days, but Lewis contends there is little it can do to change the broader market behavior. He says the interest rate differential remains huge and favors the US dollar, so he treats dips toward the 160-yen level as value and adds on drops.
Sources: FXStreet, DailyForex
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