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  • The dollar is edging higher as markets expect more massive Fed hikes this year.
  • Traders are highly alert after Japan’s authorities issued warnings against yen declines.
  • Fundamentals still support a weaker yen, according to analysts.

Today’s USD/JPY forecast is bullish. The dollar edged higher from a two-week low coming close to a 32-year high against the yen as traders evaluated improvement in risk sentiment against the potential of faster Federal Reserve rate hikes.

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As the currency pair approaches the crucial psychological barrier of 150, traders are on high alert for the Ministry of Finance and Bank of Japan to intervene in the market once more. About a month ago, a cross of 145 prompted the first yen-buying intervention since 1998.

According to local media, Japanese Finance Minister Shunichi Suzuki stated on Wednesday that he was “meticulously” and “more frequently” monitoring currency rates.

Haruhiko Kuroda, governor of the Bank of Japan, reiterated his usual line that market stability in foreign exchange was “very important,” characterizing the recent lowering of the yen as abrupt and one-sided.

The dollar has recently suffered losses as global equities rallied on upbeat earnings. This meant investors were not scrambling for safety in the dollar anymore. However, the dollar is gaining ground as investors anticipate two more 75bps Fed rate hikes this year.

“A number as round as 150 will probably take some work to break short-term. However, given the BOJ’s position as the only developed-market central bank still pursuing a negative interest rate policy, it’s hard to see why the pair wouldn’t extend into the 150-155 area,” said Sean Callow, a currency strategist at Westpac in Sydney.

USD/JPY key events today

Investors expect a trade balance report from Japan and a building permits report from the United States later in the day.

USD/JPY technical forecast: Bearish divergence signals an imminent reversal

USD/JPY forecast

Looking at the 4-hour chart, we see the price trading above the 30-SMA and the RSI above 50, showing a bullish trend. However, the RSI shows weakness in the bullish trend as it has made a bearish divergence with the price. The weakness can also be seen in how the price has made small-bodied candles.

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At this point, bears might return, and if strong enough, they might push the price below the 30-SMA. If this happens, the price will likely retest support at 147.05.

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