USD/JPY pauses below 160 barrier amid intervention threats and BoJ rate Hike signals

USDJPY hit important 160 resistance but stays below this level for the second consecutive day, as traders remain highly cautious after previous intervention commenced in this zone and Japanese officials reiterated today their readiness to intervene again.

This cautious stance is supported by today’s comments from the BoJ’s Governor, who highlighted increased inflationary risks from the energy shock sparked by the war in the Middle East, boosting expectations for a rate hike at the central bank’s June policy meeting.

Initial signals of a potential stall in the larger rally are developing on the daily chart (overbought stochastic / 14-day momentum bearish divergence) and contribute to a scenario of the 160 zone capping the rally from 155.02 (May 6 low), as today’s price action was shaped in a Hanging Man candle that also marks an initial reversal signal.

On the other hand, today’s dips were contained by the first support (daily Tenkan-sen at 155.38) and near-term action is expected to maintain a bullish bias while holding above the daily cloud (top at 159.03), though the cloud starts to thin tomorrow and will twist next week, which could attract fresh bears.

Look for an initial negative signal on a violation of the daily Tenkan-sen, which would be reinforced by a price drop into the daily cloud.

On the upside, a violation of the 160 barrier cannot be ruled out, though upticks are likely to be limited (similar to previous attempts in March / April) due to persistent intervention threats.

Res: 160.00; 160.45; 160.72; 161.00
Sup: 159.38; 159.00; 158.54; 157.87