USD/JPY Rally Hits Overbought Levels as Intervention Fears Grow

The USD/JPY exchange rate has extended its five-day rally, reaching 158.83. Despite this momentum, technical indicators are overbought and showing negative divergence.

According to analysis, consolidation rather than an extended run higher is expected in the near term, with trading between 158.30 and 159.00 seen as likely.

The pair tested resistance at 158.40 two days ago and broke above it, reaching 159.03. The setup allows for a potential test of major resistance at 159.60, while support is now placed at 157.60.

As the exchange rate approaches the psychologically crucial 160.00 threshold, historical precedent suggests that massive currency interventions may occur, which traders should heavily hedge against with out-of-the-money put options.