Can USD/JPY rally through this 300-pip liquidity gap?

Divergent monetary policies between the Fed and BOJ have allowed USD/JPY to extend its bullish trend on the daily chart. Whilst the Fed are very close to their terminal rate, they have to keep the threat of further hikes on the table to tame inflation expectations. When coupled with the ultra-easy policies of the BOJ, we've seen USD/JPY return to its cycle highs.

However, the current resistance level around the November high marks the lows of a ~300-pip liquidity gap - and such areas can see prices move swiftly through them if revisited.

Soft US inflation data last November sent USD/JPY aggressively lower on the day, and left the liquidity gap to potentially be filled. The question now is whether bulls can persist and send prices within it, which could see USD/JPY head for the range highs around 145.

Of course, a building threat for bulls to keep in the back of their mind is that Japan's Ministry of Finance or the BOJ could become vocal about yen volatility to spook JPY bears. But until then, we prefer to buy dips on the daily chart or seek bullish continuation patterns on lower timeframes.

Comment:

This is playing out like clockwork, with markets mostly ignoring early attempts for Japan's MOF (ministry of finance) to jawbone the yen. Still, we expect the likelihood of verbal intervention to intensify the closer we get to (and above ) 145.

Trade closed: target reached:

This played out beautifully, with USD/JPY having the courtesy to follow our bullish line.