• USD/JPY marches firmly at around the 145.70s area as threats of Japanese intervention loom.
• Last week’s US employment report justifies the Fed’s case to go 75 bps in the November meeting.
• Fed’s Evans is optimistic that the Fed might slow down inflation without “causing” a recession.

The USD/JPY is advancing steadily towards the YTD high at around 145.90, increasing the odds of another FX intervention by Japanese authorities to bolster the JPY, which has remained weakening against most G8 currencies, particularly the greenback. At the time of writing, the USD/JPY is trading at around 145.77, up 0.28%, shy of printing a new 24-year high, above 145.90.

Risk aversion keeps the greenback appreciating against most currencies. The US bond market is closed in observation of the Columbus holiday, with USD/JPY traders leaning on US dollar dynamics and market sentiment.

Last week’s US economic data, led by the US Nonfarm Payrolls, beat estimates, opening the door for further Fed rate hikes. In the past week, Fed officials emphasized the need to raise rates higher to tame inflation down, pushing back against cutting rates in 2023.

Earlier, Chicago’s Fed President Charles Evans said that the US central bank could be able to slow down inflation “while also avoiding a recession.” Evans added that he stills sees the Federal funds rate (FFR) above the 4.5% early in 2023 “and then remaining at this level for some time.”

Elsewhere, the US Dollar Index, a gauge of the greenback’s value against a basket of rivals, edges up by 0.35% at 113.147, a tailwind for the USD/JPY. Therefore, USD/JPY traders should expect further upside, though fears of another Bank of Japan’s (BoJ) intervention in the FX markets looming might stall the rally at around the 146.00 mark.

What to watch

The US economic docket will feature Fed speaking, led by Vice-Chair Lael Brainard and Loretta Mester. Data-wise, the September US Producer Price Index (PPI) will be unveiled on Wednesday, followed by inflationary figures on the consumer side by Thursday.

USD/JPY Key Technical Levels