"The dollar has found support at the 140 level for the third time in 18 months," says a new research note from Longview. "Technicians often argue that once a level has been tested and held three times, it becomes strong support."
As of mid-May, net speculative positioning in USD/JPY is at its most bearish on record, a dynamic that Longview believes provides "fuel for further upside."
The analysts add that sentiment around the pair has hit “multi-year bearish levels”—typically a contrarian buy signal.
In technical terms, the firm highlights the emergence of a reverse head and shoulders formation in the chart, a classic bullish pattern. "That pattern, combined with oversold technicals, suggests that the trend is shifting in favour of the dollar," analysts noted.
However, the firm also flagged longer-term macro risks, particularly in Japan’s government bond (JGB) market. Yields on JGBs have surged to multi-decade highs in recent months, amid persistent inflation pressures and the Bank of Japan’s quantitative tightening programme.
"We’re closely watching the rapid backup in JGB yields," analysts said. "It raises broader questions about fiscal sustainability and whether Japan could face a financing challenge if yields continue to climb."
Despite these structural concerns, the near-term view remains clear: "The setup for a USD/JPY rally in coming weeks looks compelling," analysts say.