Dollar bulls have regained control as a combination of heightened geopolitical tensions, concerns over European sovereign debt, and a heavy week of event risk boosts demand for the greenback.

Investors face a packed week of event risk, with U.S. corporate earnings, Wednesday's CPI report and remarks from several officials, including Fed Chairman Kevin Warsh and potentially BOJ Governor Kazuo Ueda. Stronger-than-expected inflation data and higher oil prices could bolster expectations for additional Fed tightening, providing further support for USD/JPY.

Against a backdrop of broad-based dollar strength and USD/JPY's break above its 200-day moving average at 158.55, focus is shifting toward the nearby Ichimoku cloud top, the Sept. 24 high at 159.03 and the key psychological 160 level, where Japanese exporter offers are expected to emerge. Further gains could also trigger the capitulation of speculative shorts established on expectations of additional BOJ rate hikes and renewed intervention, adding fuel to any upside extension in USD/JPY.

Sustained USD/JPY strength would raise intervention and BOJ response risks, but subdued implied volatility suggests markets remain complacent despite past interventions often occurring around major policy and international meetings, including this week's IMF and G20 gatherings. Comments from BOJ Governor Ueda could provide important policy signals, with any failure to deliver a sufficiently hawkish message posing a notable risk to yen bulls and potentially encouraging a fresh leg higher in USD/JPY.
Yen

(Robert Fullem is a Reuters market analyst. The views expressed are his own.)