USD/JPY cannot be separated from the Federal Reserve’s terminal rate. Economists at TD Securities highlight that the pair could reach 150 as the upswing through multi-decade trendline exposes material upside.

US real yields remain too low

“Unless the Fed abandons hikes or the BoJ unlikely adopts them, USD/JPY will be at the beck and call of the Fed's terminal rate, which likely remains too low and will not be established until well into the tightening cycle. US real yields also remain too low.”

“Many are watching 130 as a key level, but we view 135+ as a more formidable line in the sand.”

“This upleg broke the post-Plaza Accord multi-decade trendline, which keeps USD/JPY ordinates higher and exposes upside potential to 150.”