Japanese Yen: BoJ guidance key after Fed move – OCBC

OCBC strategist Christopher Wong writes that USD/JPY climbed after the FOMC as front-end US yields rose and the US Dollar (USD) strengthened. He says markets expect a 25bp BoJ hike to 1.25%, with focus on Governor Ueda’s guidance on further normalisation. Wong sees elevated US yields keeping USD/JPY supported, but warns the pair could turn lower on firmer BoJ tightening signals or softer US data.

Pair supported but vulnerable to BoJ

"USD/JPY moved higher after the FOMC as front-end UST yields rose and the USD strengthened. Attention now turns to tomorrow’s BoJ meeting, where a 25bp hike to 1.25% is widely expected."

"With the hike itself largely anticipated, the bigger question is how Governor Ueda frames the path beyond September, particularly whether the BoJ signals a faster pace of normalisation amid still-elevated inflation."

"For now, elevated UST yields may keep USD/JPY supported, but the pair could turn lower again if the BoJ delivers a firmer signal on further tightening or if softer US data start to unwind some of the Fed repricing."

"Pair was last at 156.30 levels. Daily momentum shows tentative signs of turning mild bullish while rise in RSI moderated. Some consolidation likely after the recent play-out of bullish divergence on MACD. Resistance at 156.70 (38.2% fibo retracement of 2026 low to high), 157 (21 DMA). Support at 155 (23.6% fibo), 153 levels."

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