The USD/JPY pair had been poised for a breakout earlier this week, with Tuesday (November 10th) considered the clearest signal for a bullish outlook on the US dollar. The pair subsequently broke upwards as expected on Thursday, reaching 160, a two-month high, and tested this key psychological level again in early Friday trading. The current price level is temporarily holding back the bulls, but buying support on pullbacks is strong. If no intervention signals emerge in the next 18 hours, the 160 level is likely to be breached by the bulls.

The 160 mark holds deep historical significance, and intervention announcements have triggered dramatic reversals.

The USD/JPY pair last touched the 160 level in early September, when expectations of intervention ahead of the Labor Day holiday triggered a sharp drop in the exchange rate. Looking back even further, in late July, authorities intervened around 164 to support the market, providing a clear reference point for intervention. This September decline ultimately led to a drop of over 700 points in the exchange rate. However, buying interest quickly returned to the market after the decline. Ironically, when Scott Bessent directly warned the market, the USD/JPY pair found a bottom, thus initiating an upward trend that continues to this day. The market is constantly playing a game of gambles on the pace of Japanese intervention. Both verbal warnings and actual market intervention can be strong disruptive factors in the short term and are significant risk variables that cannot be ignored when trading the USD/JPY pair.

Inflation data fuels expectations of interest rate hikes, and the fundamentals continue to be favorable for USD/JPY bulls.

This week's stronger-than-expected US CPI data has led to a continued shift in market expectations for a Fed rate hike towards a hawkish stance, making USD/JPY a highly attractive trading pair for those bullish on the dollar. Going long on USD/JPY still offers a positive interest rate differential, and with US inflation remaining higher than Japan's, a substantial reversal in the interest rate differential is unlikely in the short term, providing solid support for this bullish trend. Monday's chart pattern showed signs of consolidation, with USD/JPY forming an inverted head and shoulders pattern, establishing neckline resistance based on the trendline. The subsequent successful breakout above this resistance level opened up further upside potential, with the technical pattern supporting the bullish trend.

Short-term game focus: verbal intervention or substantive market intervention?

The most pressing question in the market right now is whether Japanese regulators will reiterate their verbal intervention. Given the current environment, direct, actual intervention seems unlikely, but the possibility cannot be completely ruled out. Even if the Japanese authorities intervene, it's unlikely to change the fundamental differences between the US and Japan. The resulting decline would only provide a more suitable entry point for bulls, and the market is likely to return to its original trend within a week. As long as the fundamental dynamics between the US and Japan remain unchanged, most bearish movements can only be defined as short-term corrections. Even a decline driven by policy intervention is unlikely to reverse the trend. Whether it's using foreign exchange reserves or merely issuing intervention warnings, it's difficult to alter this underlying logic. Chart: USD/JPY hourly chart

Strong buying support indicates bulls are preparing for a second attempt to break through the key level.

The hourly chart shows that after the price first touched the 160 level, buying pressure quickly emerged, pushing the price upwards again, preparing for a second attempt to break through this key psychological level. Short-term price action is characterized by repeated back-and-forth movements, with bulls and bears battling around the 160 level. News related to market intervention will be the biggest variable influencing the pace of short-term price fluctuations.

Conclusion

The USD/JPY pair has been on a sustained upward trend, fueled by expectations of a Fed rate hike and the interest rate differential, and has now returned to the key level of 160, a level with a history of intervention. In the short term, close attention needs to be paid to Japanese policy statements; news of intervention will only create short-term pullbacks and is unlikely to reverse the overall trend. As long as the fundamentals do not change, the bullish trend will remain dominant, and whether subsequent levels can be effectively broken will guide the next phase of USD/JPY's price movement. USD/JPY Daily Chart Source: FX678 At 11:01 AM Beijing Time on November 13th, USD/JPY was trading at 159.93/94.