• USD/JPY keeps rallying to hit fresh 20-year highs above 127.50.
• Fed/BOJ divergence bolsters the sentiment around the US Treasury yields.
• Daily RSI is extremely overbought but bulls refuse to give up yet.

USD/JPY is trading close to fresh 20-year highs above 127.50, as the mixed market mood underpins the haven demand for the US dollar while the Treasury yields take a breather.

Despite the pullback in the US rates from three-year peaks, the buying interest around USD/JPY remains unabated, as the divergent monetary policy outlooks between the Fed and the Bank of Japan (BOJ) continue to favor the dollar bulls.

Further, the verbal intervention by the Japanese officials fail to offer any comfort to the domestic currency, as they had conflicting views on the implications of the ongoing decline in the yen on the overall economy.

Also read: Japan’s Suzuki: Yen's rapid weakening can have more negative impact

Looking ahead, the speech from the Chicago Fed President Charles Evans will be eyed, in absence of top-tier US economic data.

Technically, USD/JPY’s daily chart shows that the price remains poised to regain further ground northwards, especially after bulls took out the rising trendline resistance at 126.67 a day before.

That said, the pair could extend the advance to retest the 128.00 mark.

Although the 14-day Relative Strength Index (RSI) lies in extremely overbought territory, warranting caution for bulls.

USD/JPY: Daily chart

In case bulls give in to the overbought conditions, then a pullback towards the previous trendline resistance now support at 126.77 cannot be ruled out.

Further down, the 126.50 psychological level could come to the rescue of buyers.

USD/JPY: Additional levels to consider