#TradeOfTheWeek

Trade of the Week: USD/JPY Surges to 24-Year High Amid Diverging Central Bank Policies**

The USD/JPY currency pair has dominated headlines this week, soaring to a 24-year high of 148.50 as contrasting monetary policies between the Federal Reserve and the Bank of Japan (BoJ) fuel market momentum. With the Fed maintaining its hawkish stance to combat inflation—hinting at further rate hikes—the U.S. dollar has strengthened broadly. Meanwhile, the BoJ remains an outlier, clinging to ultra-loose policies and yield curve control, widening the interest rate differential and pressuring the yen.

Technical analysis reveals the pair has broken key resistance levels, with bulls eyeing the psychologically significant 150.00 mark. However, overbought signals on the daily Relative Strength Index (RSI) suggest potential short-term pullbacks, offering traders strategic entry points. Fundamentals remain the primary driver: U.S. Treasury yields near 4.5% contrast sharply with Japan’s near-zero rates, incentivizing carry trades.

Caution lingers as Japanese authorities signal discomfort with the yen’s rapid depreciation, raising intervention risks. Yet, with the Fed unlikely to pivot soon, the dollar’s upward trajectory against the yen appears intact. Traders are advised to monitor U.S. inflation data and BoJ rhetoric for volatility triggers.

This week’s trade exemplifies the power of macroeconomic divergence, offering opportunities for trend followers while underscoring the need for risk management in a politically sensitive environment.