USD/JPY climbs above 151.00. What’s next

USD/JPY is at the best levels of the day, up 66 pips to 151.05.

The pair was hit with a double-whammy yesterday with a squeeze lower followed by a broad rout in the US dollar. Today, the bulls are beginning to wade back in with Treasury yields up 6-9 bps across the curve.

There is a distinct ‘buy the dip’ trade in this pair and the bulls were waiting for the smoke to clear from yesterday’s rout and to get past retail sales. The sales data was dollar-bullish so that’s helped to generate some momentum.

Ultimately, I think the only way this pair tops out is:

1. The US economy stumbles, leading to imminent Fed rate cuts
2. The Bank of Japan ends YCC and begins a rate hiking cycle (without the side effect of an implosion in JGBs)