USD/JPY rose as bets on BOJ hike this week was scaled back significantly while USTs saw a sell-off last Fri (i.e. UST yields rose sharply). Pair was last at 153.70, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“USD/JPY’s breakout was well anticipated in our technical scan when we first highlighted about moving averages compression (MAC) last week. We noted that this pattern typically precedes a break-out trade. Daily momentum turned mild bullish while RSI rose to near overbought conditions. Resistance at 154.80, 155.90 levels. Support at 152.70, 152.10 (21, 100, 200 DMAs). A decline back below the MA ‘convergence level’ would nullify the bullish break-out.”
“This week, BoJ MPC (19 Dec) matters for USDJPY. We are looking for BoJ to carry on with policy normalization with a hike this week and into 2025. Recent uptick in base pay supports the view about positive development in labour market, alongside still elevated services inflation, better 3Q GDP and expectations for 5-6% wage increases for 2025 should pace the room for BoJ policy normalisation.”
“That said, the risk is a slowdown in Fed and/or BoJ’s pace of policy normalisation would affect USDJPY’s moves.”
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