USD/JPY Soars as Strong US Data Trumps Japanese Growth Concerns

The USD/JPY pair has made significant gains recently, reclaiming the 158 level after a collapse at the start of this month. The recovery is largely driven by the strengthening nominal growth outlook in the US, which has led to higher Treasury yields and a corresponding rise in the dollar.

The correlation between Treasury yields and USD/JPY remains historically elevated, with a relationship of +0.85 over the past week against US two-year yields. This suggests that traders should focus on shifts in front-end yields when assessing the pair's direction.

Japan's economic growth momentum has cooled, while the US economy continues to show strong performance. The Citi US Economic Surprise Index has rebounded sharply, indicating a widening gap between US and Japanese economic data.

The risk of intervention remains elevated, but for now, the bullish trend is favored. Key technical levels include 157.60 and 158.40, with a push above the latter potentially leading to a retest of 159 or 159.50.