USD/JPY: Downside play – OCBC

USD/JPY continued to trade lower despite US Dollar (USD) strength seen elsewhere. Pair was last at 153.95 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is mild bearish

“Move lower remains consistent with our downside bias. Tariff threats, geopolitical uncertainties are additional drivers that should be supportive of JPY strength. Daily momentum is mild bearish while RSI fell. Risks skewed to the downside. Support at 153.30 (61.8% fibo retracement of 2024 high to low) and 152 (200 DMA). Resistance at 155.70, 156.60 (76.4% fibo).”

“PM Ishiba said that he swapped views with business and union leaders on pay talks and ask businesses to continue with pay hikes. He is also calling for bigger wage deal than this year’s. To add, PPI services came in higher at 2.9% y/y (vs. 2.5% expected). Price-related data continues to reinforce our view that BOJ should proceed with another hike next month.”

“Divergence in Fed-BoJ policies should bring about further narrowing of UST-JGB yield differentials and this should underpin the broader direction of travel for USD/JPY to the downside.”