USD/JPY flirts with multi-week high, just below the 150 possible intervention level

• USD/JPY regains positive traction on Friday and climbs back closer to a multi-week top.
• The divergent BoJ-Fed policy outlook turns out to be a key factor acting as a tailwind.
• The risk-off mood could benefit the safe-haven JPY and cap gains amid intervention fears.

The USD/JPY pair attracts some dip-buying on the last day of the week and steadily climbs back closer to the 150.00 psychological mark, or a near three-week high touched on Thursday.

Bank of Japan (BoJ) Governor Kazuo Ueda reiterated this Friday that the central bank will aim at stably, sustainably achieving a 2% inflation target, accompanied by wage growth, by patiently maintaining the current easy policy. This marks a big divergence in comparison to the Federal Reserve's (Fed) hawkish outlook, which, in turn, is seen as a key factor behind the Japanese Yen's (JPY) relative underperformance and acts as a tailwind for the USD/JPY pair.

Fed Chair Jerome Powell said on Thursday that the recent spike in yields was tightening financial conditions, lessening the need for more action by the central bank. Powell, however, noted that monetary policy was not yet too tight and that inflation was still too high, leaving the door open for at least one more rate hike by the year-end. This helps revive the US Dollar (USD) and lends some support to the USD/JPY pair, though the uptick lacks bullish conviction.

Market participants seem convinced that the Fed will maintain the status quo for the second straight time in November. This leads to a modest decline in the US Treasury bond yields and holds back the USD bulls from placing aggressive bets. Traders, meanwhile, remain worried about a potential intervention by Japan to combat a sustained depreciation in the JPY. Apart from this, the risk-off mood should limit losses for the safe-haven JPY and cap the USD/JPY pair.

In the absence of any relevant market-moving economic releases on Friday, the aforementioned fundamental backdrop warrants some caution before positioning for any further appreciating move. That said, any meaningful corrective decline might still be seen as a buying opportunity and is more likely to remain limited. Nevertheless, spot prices, at current levels, seem poised to register modest gains for the second straight week.

Technical levels to watch