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• USD/JPY scales higher for the seventh straight day and hits a fresh YTD peak on Tuesday.
• The recent move up along an ascending channel points to a well-established positive trend.
• Intervention fears hold back bulls from placing fresh bets and cap the upside for the major.

The USD/JPY pair gains some positive traction for the seventh successive day on Tuesday and climbs to its highest level since November 2022, around the 145.85 region during the early part of the European session.

The Japanese Yen (JPY) continues with its underperformance in the wake of a more dovish stance adopted by the Bank of Japan (BoJ), which is the only central bank in the world to maintain a negative benchmark interest rate. This, in turn, is seen as a key factor acting as a tailwind for the USD/JPY pair amid the underlying bullish tone around the US Dollar (USD), supported by expectations that the Federal Reserve (Fed) will keep rates higher for longer.

Even the upbeat Japanese GDP report, showing that the economy expanded by 1.5% during the second quarter and a 6% annualized pace, fails to provide any respite to the JPY. That said, speculations for a possible intervention by Japanese authorities to curb any further fall in the domestic currency hold back bulls from placing fresh bets. The fundamental backdrop, however, suggests that the path of least resistance for the USD/JPY pair is to the upside.

From a technical perspective, the recent strong move-up witnessed over the past one-and-half week or so has been along an upward sloping trend-channel. This, along with last week's breakout through the 145.00 psychological mark, adds credence to the positive outlook for the USD/JPY pair. That said, the Relative Strength Index (RSI) on the 1-hour chart is flashing slightly overbought conditions and warrants caution for bullish traders.

Hence, any subsequent move up is more likely to confront stiff resistance and remain capped near the 146.00 mark, representing the top boundary of the aforementioned trend channel. The said handle should act as a pivotal point, which if cleared will be seen as a fresh trigger for bullish traders and lift the USD/JPY pair beyond an intermediate hurdle near the 146.35 area, towards the 146.75-146.80 region en route to the 147.00 round figure.

On the flip side, any meaningful corrective decline might now find decent support near the 145.00 resistance breakpoint. This is followed by the lower end of the ascending channel, currently pegged around the 144.60 region. A convincing break below the latter might negate the constructive setup and shift the near-term bias in favour of bearish traders. The subsequent fall could then drag the USD/JPY pair to the 144.00 mark and then to the 143.30 horizontal support.
 

USD/JPY 4-hour chart

(Click on image to enlarge)

Technical levels to watch

USD/JPY

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