USD/JPY breaks above 158 on BoJ's dovish stance, targets new highs

USD/JPY surged 0.8% to 158.40, clearing the critical 158.00 resistance level as Bank of Japan officials signaled continued monetary accommodation. The pair reached its highest level since July, with momentum indicators suggesting further upside potential toward 160.00. Japan's Deputy Governor hinted that current inflation levels don't warrant immediate policy tightening, contrasting sharply with the Federal Reserve's hawkish stance maintaining rates at 5.5%. The yield differential between 10-year US Treasuries (4.65%) and Japanese Government Bonds (0.95%) widened to 370 basis points, supporting carry trade flows into USD/JPY. Technical analysis reveals strong buying interest above 158.00, with the next major resistance at 159.50 (June high). Support has formed at 157.20, coinciding with the 20-day moving average. Traders should monitor upcoming Japanese wage data and US CPI figures, which could accelerate the pair's ascent toward the psychological 160.00 barrier.