USD/JPY Price Analysis: Pair Might Hit 140 on Rising US Rates

• Investors are buying the pair in anticipation of rising US interest rates.
• There is a 75% chance the Fed will deliver a 75bps rate hike in September.
• The pair has reached a 24-year high above 139.

Today’s USD/JPY price analysis is bullish. The dollar gained significantly, especially against the yen, as investors prepared for rising US interest rates while anticipating that the anchored Japanese rates would not change anytime soon.

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Early Asian trading saw the dollar reach a 24-year high versus the yen of 139.69, up around 0.5% from the previous day’s closing.

“The main driver remains rate differentials between Japan and the US, and even today’s price action follows the overnight increase in US rates. And we think the path ahead will depend on how US rates behave,” said Sosuke Nakamura, a strategist at JPMorgan in Tokyo.

Based on strong economic statistics, expectations are building for a 75 basis point increase in US interest rates at the Federal Reserve meeting next month. Fed funds futures recently indicated a 75% likelihood of such an increase.

“So long as expectations for the peak in the Fed funds rate keep ratcheting higher while the Bank of Japan remains on hold, dollar/yen will be a buy on dips. Anywhere in the low 140s now looks plausible,” said Sean Callow, a currency strategist at Westpac in Sydney.

The two-year Treasury yield reached its highest level since late 2007 at 3.516%.

USD/JPY key events today

News releases from the United States today will include the initial jobless claims report expected to go up from 243K to 248K. The ISM Manufacturing PMI for August is expected to drop from 52.8 to 52.0.

USD/JPY technical price analysis: Bulls beyond the 139 level

Looking at the 4-hour chart, we see the price trading above the 30-SMA, indicating bulls are in control. The RSI supports bullish momentum as it trades above 50. The price has just broken above a critical resistance level at 139.023 and will likely head higher.

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This level has stopped bulls from going higher for some time, and in that time, they built enough momentum to break above and create a new high. This trend will remain bullish if the price keeps trading above the 30-SMA and RSI stays above 50.

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