Japanese Yen: Yield pressure risks fresh losses against US Dollar – OCBC

OCBC’s Christopher Wong highlights a rebound in USD/JPY as higher US Treasury yields, stronger US Dollar (USD) and elevated Oil prices support the pair, even as expectations for further BOJ normalisation cap upside. He flags tentative bullish divergence on technicals and says US CPI will be pivotal for whether the recent USD/JPY rebound extends or fades.

Higher yields underpin Dollar against Yen

"USD/JPY rebounded. Firmer UST yields following PPI and a broader USD recovery provided support, while higher oil prices added to inflation concerns and were also a less favourable development for Japan’s terms of trade. Focus now shifts to US CPI."

"An upside surprise, particularly in core inflation, could push UST yields higher and extend the USD/JPY rebound. Conversely, a softer print would likely unwind some of the recent rates repricing and allow the JPY recovery theme to regain traction."

"Near-term direction is therefore likely to remain sensitive to the US rates leg, while expectations for further BOJ normalisation should continue to provide a counterweight to sustained USD/JPY upside."

"Our earlier technical caution for dragonfly doji - bullish reversal risk played out. Last seen at 154.25 levels. Bearish momentum intact though there are tentative signs of it fading while RSI rose from oversold conditions."

"We now flag the potential risks of bullish divergence on MACD and RSI tentatively forming though it is still early to confirm. Resistance at 155 (23.6% fibo retracement of 2026 low to high), 156.70 (38.2% fibo). Support at 153, 152.20 levels (2026 low)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)