USD/JPY Consolidates After Extended Rally as Overbought Signals Emerge

USD/JPY has entered a consolidation phase after a relentless rally pushed the pair into overbought territory on multiple timeframes. Technical indicators including the RSI above 70 and stretched positioning data suggest the pair may be due for a pullback or sideways movement. The pause comes as traders reassess the sustainability of the yen's weakness amid diverging monetary policies between the Federal Reserve and Bank of Japan. USD/CHF and the Dollar Index have shown similar patterns, indicating broad dollar strength may be temporarily exhausted. Key resistance levels are being tested, with failure to break higher potentially triggering profit-taking. Despite near-term caution signals, the fundamental backdrop remains supportive for USD/JPY given the wide interest rate differential. Traders are advised to monitor 145.00-146.00 as a critical range for determining the next directional move.