USD/JPY is likely to reach 150.00 if the BOJ delays involvement

During the Tokyo session, the USD/JPY pair is lingering close to the immediate barrier of 149.00. Despite the optimistic market sentiment, the asset has broken above the range-bound structure produced in the 148.41-148.89 price range.

The mighty US dollar index (DXY) is lagging other risk-perceived currencies due to a drop in the desirability of safe havens. Meanwhile, risk sentiment has become overwhelmingly optimistic. On Monday, the S&P 500 exhibited a V-shaped comeback following a brutal Friday. In spite of this, rates on 10-year US Treasuries continue to maintain steady at 4% as expectations on a 75 basis point (bps) rate hike by the Federal Reserve (Fed) remain significant.

Supported by the Bank of Japan's dovish policy advice, the USD/continuous JPY's upward momentum is enticing it to surpass the psychological level of 150.00. (BOJ). Reuters reported on Friday that BOJ Governor Haruhiko Kuroda declared, "It is prudent to continue monetary easing." He noted that the central bank anticipates a decline in inflationary pressures to 2%, thus a continuation of dovish monetary policy is needed.

This has left the BOJ with no alternative but to intervene in the currency market. The BOJ is willing to intervene in FX movements to strengthen the Japanese yen in response to excessive fx movements caused by speculative trading. Minister of Finance of Japan Shun'ichi Suzuki stated, "They are continually monitoring foreign exchange movements with a sense of urgency."

In the future, Tuesday's Japan Trade figures will be closely observed. Due to the weak yen, imports are expected to decrease to 45% from 49.9% previously, while exports will increase to 27.1% from 22.1% previously.