USD/JPY prints new 32-year peak, eyes 148.00 amid stronger USD ahead of US data

• USD/JPY gains strong follow-through traction and hits a fresh 32-year high on Friday.
• The Fed-BoJ policy divergence continues to weigh on the JPY and remains supportive.
• Speculations that Japanese authorities could intervene warrant some caution for bulls.

The USD/JPY pair continues scaling higher on the last day of the week and hits a fresh 32-year high, around the 147.75-147.80 region during the first half of the European session.

The bearish pressure surrounding the Japanese yen remains unabated on the last day of the week, which, in turn, pushes the USD/JPY pair high. The policy divergence between the Federal Reserve's aggressive interest rate hikes and the Bank of Japan's resolve to keep monetary policy ultra-loose is seen as a key factor weighing on the JPY.

In fact, the current market pricing suggests the fourth consecutive 75bps rate hike at the next FOMC policy meeting in November. The bets were lifted by Thursday's hotter US CPI report, which showed that core inflation (excluding food and energy prices) registered the biggest gain since August 1982 and shot to a new cycle peak in September.

In contrast, the BoJ, so far, has shown no inclination to raise interest rates and remains committed to continuing with its monetary easing. The dovish bias was reaffirmed by Governor Haruhiko Kuroda's remarks on Thursday, saying that increasing interest rates now was inappropriate in light of the country's economic and price conditions.

This, along with the emergence of fresh US dollar buying, remains supportive of the ongoing strong move up, though slightly overbought conditions warrant caution for bulls. Adding to this, speculations for more currency market intervention by Japanese authorities could offer support to the safe-haven JPY and cap any further gains for the USD/JPY pair.

Nevertheless, spot prices remain on track to register gains for the ninth successive week. Traders now look to the US economic docket, highlighting monthly Retail Sales figures, along with the Prelim Michigan Consumer Sentiment and Inflation Expectations Index. This might influence the USD and provide some impetus to the USD/JPY pair.

Technical levels to watch