The Japanese yen has been declining against most major currencies throughout the entire session as Takaichi's opposition for further rate hikes put downward pressure on the currency.
There's nothing in the near-term that could support the yen, unless we get a very hot Tokyo CPI report on Friday. As things stand, the yen should continue to weaken as rate hikes get delayed amid Takaichi's pressure and benign inflation data.
The USD/JPY pair broke above a key technical trendline today and opened the door for a rally into the 159.00 handle where we got strong verbal intervention from Japanese officials last month and eventually the "rate checks" that caused the massive selloff.
We still have a key swing level at 157.65 that could act as resistance, but unless we get some negative shock that triggers a dovish repricing in Fed interest rate expectations, we can expect the pair to eventually breach the level and reach the 159.00 handle.
The two main risks for now are the US-Iran nuclear talks tomorrow and the US NFP report next Friday. A military escalation could trigger severe risk-off with US stocks and bond yields falling, which could favour the JPY.
On the data front, Fed's Waller mentioned that he would change his dovish stance in case the strong January’s jobs data is repeated in February, so if we get another strong NFP, the hawkish repricing would drive the pair even higher.
