USD/JPY bulls remained in command after Fed Governor Kevin Warsh struck an upbeat tone on the U.S. economy and warned that inflation has remained elevated for too long.

The pair climbed to a post-intervention high above 160 amid broad-based dollar strength, extending a bull channel from the intervention low near 155.20.

Further gains are possible if investors rebuild dollar longs and yen shorts after August's position trimming. Weekly CFTC data show leveraged funds have begun cautiously adding short-yen exposure as volatility declines. However, yen futures open interest has dropped to its lowest level since April, suggesting bearish conviction remains limited.

Intervention concerns could re-emerge if USD/JPY remains above the 160 psychological level and approaches its 160.34 upper Bollinger and 160.63 cloud bottom as upward momentum builds.

For now, however, option convexity sees only modest intervention risk despite next week's G20 meeting involving Japan Finance Minister Satsuki Katayama, U.S. Treasury Secretary Scott Bessent and BOJ Governor Kazuo Ueda.

While past intervention episodes have often coincided with major policy events such as the G20, the yen may be more focused on equity performance and upcoming U.S. payrolls and CPI reports, along with mid-September Fed and BOJ meetings. On the downside, a break below 159.60, followed by the 21-day moving average at 158.84, would temper the bullish outlook with a close below a flat 200-day moving average at 158.41 inviting bears.
Yen


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