• USD/JPY trades down to161.10 as traders stay cautious near the four-decade high around 162.00.
• Intervention risks remain elevated with Japanese authorities closely monitoring currency moves.
• US PCE is the next key catalyst as a stronger inflation print could support the Fed’s restrictive stance, while softer data may trigger profit-taking.

The USD/JPY pair sank as low as 161.07 on Monday, retreating from highs near 161.90 as traders remain alert to possible Japanese intervention after the pair moved close to a four-decade high.

Japanese officials have repeatedly warned that they are closely monitoring currency markets, and the latest move comes after USD/JPY posted its highest weekly close in about 40 years.

For now, USD/JPY remains supported by the Greenback’s yield advantage, but the closer the pair gets to 162.00, the greater the risk of verbal or direct intervention from Tokyo. That could leave the pair vulnerable to sharp pullbacks even if the broader trend remains tilted to the upside.

Attention also turns to the upcoming US Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred inflation gauge. A stronger-than-expected PCE reading on Thursday could reinforce expectations that the Fed will keep policy restrictive for longer, while a softer print may give traders a reason to take profit after the pair’s strong rally.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 161.35, maintaining a constructive bullish bias as it holds above the 20-period Simple Moving Average (SMA) at 161.12 and the 100-period SMA at 160.27. The pair also stays above horizontal support at 161.16, while the Relative Strength Index (RSI) eases back toward the mid-60s area around 59, suggesting bullish momentum is moderating rather than reversing after recent overbought readings.

On the topside, initial resistance is seen at 161.58, followed by 161.77, and then the recent horizontal cap near 161.92. On the downside, a break below the nearby 161.16 support would expose the 20-period SMA at 161.12, with the deeper 100-period SMA underpinning the broader uptrend around 160.27.

(The technical analysis of this story was written with the help of an AI tool.)