USD/JPY pulls back from 158 highs amid conflicting market signals

USD/JPY retreated 0.5% to 157.60 from session highs near 158.20, as mixed signals create uncertainty about the pair's near-term direction. The correction follows a sharp rally that pushed the pair to three-month highs, with profit-taking emerging ahead of key resistance. US 10-year Treasury yields eased 5 basis points to 4.58%, reducing the interest rate differential that has supported USD/JPY strength. Japanese officials have increased verbal intervention warnings as the yen approaches the 160 level, where authorities previously intervened in foreign exchange markets. Technical indicators show RSI entering overbought territory above 70, suggesting potential for deeper pullback toward 156.80 support. However, the underlying bullish trend remains intact above the 155.50 pivot level. Market participants await Wednesday's US PPI data and Thursday's Japanese machinery orders for clearer directional cues, with volatility expected to remain elevated.