USD/JPY Tests Multi-Year Breakout LevelUS Dollar / Japanese YenCAPITALCOM:USDJPYCapitalcomUSD/JPY has broken through a major area of resistance during Asian and early European trading. Let's take a look at what's driving the move and why the next phase may prove more important than the breakout itself. Interest Rate Expectations Still Drive the Story Earlier this month, the BoJ raised interest rates to 1% for the first time since 1995. In isolation, that would normally be viewed as a meaningful shift. Yet the market response has highlighted an important point: currencies rarely move on the direction of policy alone; they move on the relative direction of policy. While Japan continues its gradual path towards monetary normalisation, the Fed has simultaneously shifted towards a more hawkish stance. Markets continue to price the possibility of another US rate increase before year-end, leaving the yield differential firmly tilted in favour of the dollar. That helps explain why USD/JPY has continued to appreciate despite repeated intervention warnings from Tokyo. The authorities may influence the pace of the move, but until the underlying interest rate differential begins to narrow, the broader trend remains difficult to reverse. For now, the market appears more comfortable pricing the carry than the intervention risk. The Breakout Now Faces Its First Test The daily chart first established acceptance above the closely watched 160 area before consolidating into a small triangle beneath the longer-term highs. Rather than rejecting higher prices, the market spent several sessions absorbing the previous advance before attempting another push higher. That sequence is often more revealing than the breakout itself. Strong trends rarely move in a straight line. They advance, pause and then ask the market another question: are buyers still willing to step in at these higher levels? So far, the answer has been yes. USD/JPY Daily Candle Chart Past performance is not a reliable indicator of future results The weekly chart, however, reminds us why patience still matters. USD/JPY is attempting to move beyond a resistance level that has defined the upper boundary of the market for more than a year. Weekly breakouts are rarely confirmed in a single session and, with several trading days still remaining, this should still be viewed as an ongoing test rather than a completed breakout. Whether this ultimately develops into the next leg of the longer-term uptrend will depend less on today's move to fresh highs and more on what happens next. If former resistance begins to attract buyers on any pullback, the technical picture would strengthen considerably. If not, this could prove to be another reminder that the biggest levels on a chart are rarely resolved in a single attempt. USD/JPY Weekly Candle Chart Past performance is not a reliable indicator of future results Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.