USD/JPY up 111 pips on the day

USD/JPY touched 143.00 for the first time since November as the market frets about rate hikes.

The thinking throughout market is increasingly that central banks are headed for higher terminal rates and at risk of overdoing it. The confirmation for the breakout in USD/JPY will come from Treasuries and a new high above 4.80% in US 2-years.

At the moment, US 2s are up 9 bps to 4.797%.

One of the sources of concern is the US housing market and the increasing realization that prices are more likely to go up rather than down from here. That has long-term implications beyond rates in 2024 as it speaks to a supply/demand mismatch that can't be remedied by rates. But it can be exasperated by rates and expectations for the Fed to return to a neutral level of rates near 2.50% might be at risk because such a move could re-ignite housing.

So not only is the market worried about higher rates but also about a higher-for-longer scenario.

Of course, that could be undone in a hurry if goods inflation falls and commodity prices stay low. Ultimately though, it's a technical trade at the moment and there's nothing standing between it and 150.00.

https://www.forexlive.com/technical-analysis/usdjpy-continues-the-breakout-as-it-touches-143-for-the-first-time-since-november-20230622/