The USD/JPY currency pair has witnessed a decline, mirroring the movements in U.S. Treasury (UST) yields following comments from Federal Reserve official Christopher Waller. As per OCBC’s FX analysts Frances Cheung and Christopher Wong, the pair was last trading at around 149.81 levels.
The bearish momentum on the daily chart remains intact. However, the Relative Strength Index (RSI) is showing signs of turning higher from a position near oversold conditions. As a result, the possibility of a rebound in the near term cannot be ruled out. In terms of key levels, resistance is identified at 151.20, followed by 152 (which coincides with the 200-day Moving Average, or DMA), and then at 153.30/70 levels (representing the 61.8% Fibonacci retracement of the 2024 high to low as well as the 21-day DMA). On the support side, levels to watch are 149.50 and 149 (corresponding to the 100-day DMA). Overall, the broader bias continues to suggest a stance against strength in the pair.
Several factors are contributing to the view that the Bank of Japan (BoJ) is likely to implement another interest rate hike in the not-too-distant future. These include price-related data such as Tokyo’s Consumer Price Index (CPI) and Producer Price Index (PPI). Additionally, developments in the labour market, like the easing of the jobless rate and an increase in the job-to-applicant ratio, are significant. Wage growth expectations also play a role, with Prime Minister Ishiba and trade unions advocating for another 5 – 6% wage increase during the shunto wage negotiations for 2025. Moreover, remarks made by BoJ Governor Ueda over the weekend on Nikkei further reinforce this outlook.
Nevertheless, in light of the risks associated with upcoming U.S. data, the USD/JPY pair may experience a period of consolidation for the time being.
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