USD/JPY: Dragged lower by risk-off trades – OCBC

USD/JPY fell amid demand for safe haven proxy, JPY. Pair was last seen at 153.52 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risks now skewed to the downside

"The pullback in USD/JPY should also reduce the risk of intervention fears. That said, delayed BOJ policy normalisation, risk of heavier fiscal burden amid rise in debt servicing costs, increase in social and defence spending and chance of early snap elections (given Takaichi’s high approval rating of 74%) are some factors that may still pose downward pressure on JPY."

"Ultimately for USD/JPY to turn lower would require a softer USD and BOJ showing more commitment to hike. Mild bullish momentum on daily chart shows signs of fading while RSI turned lower from near overbought conditions. Risks now skewed to the downside. Support at 152.40 (21 DMA), 151.60 (61.8% fibo). Resistance at 154.40 (76.4% fibo retracement of 2025 high to low).