USD/JPY extends rally to 157.20 on diverging central bank policies

USD/JPY continued its upward trajectory, gaining 0.5% to reach 157.20, marking a three-week high amid widening interest rate differentials. The Bank of Japan's ultra-dovish stance contrasts sharply with the Federal Reserve's higher-for-longer narrative, supporting the pair's bullish momentum. Japanese officials expressed concern about rapid yen depreciation but stopped short of intervention threats. Technical indicators remain strongly bullish, with the pair breaking above the 157.00 resistance and the 21-day moving average at 156.50. Next resistance lies at 158.00, coinciding with the April high. Market participants monitor Japanese wage growth data, showing only 1.2% annual increase, reinforcing BOJ's cautious approach. The widening US-Japan yield spread, with 10-year differential at 380 basis points, continues driving capital flows favoring USD/JPY upside.