USD/JPY Bulls Eye Breakout Above 159.65 as Fed Rate Hike Bets Remain in Play

The USD/JPY pair has been experiencing a bullish setup for four consecutive days, with spot prices currently trading near its weekly high. Despite lacking bullish conviction ahead of Tokyo consumer inflation figures and US Federal Reserve member Kevin Warsh's speech on Friday, the pair remains in a solid recovery mode.

The slightly hot US inflation data released earlier this week has reaffirmed market bets for at least one Fed rate hike in 2026, which is seen as acting as a tailwind for the US Dollar (USD). The Japanese Yen (JPY), on the other hand, struggles to lure buyers amid the wide US-Japan rate gap and concerns about Japan's worsening fiscal condition, lending additional support to the USD/JPY pair.

The Relative Strength Index (RSI) is around 57, and the Moving Average Convergence Divergence (MACD) is posting slightly positive readings. This setup suggests upside pressure remains in place. A move beyond 159.63, representing the 50% Fibonacci retracement level of the intervention-led slump from a four-decade peak, is needed to unlock a more decisive advance.