USD/JPY consolidates ahead of BOJ meeting – OCBC

USD/JPY remains range-bound as markets brace for the Bank of Japan's (BOJ) expected rate hike this week, with a 92% probability priced in. While the dollar's fate will largely dictate JPY movement, a meaningful JPY recovery hinges on further BOJ guidance and fiscal discipline. Support is seen at 154.40, with resistance around 156 and 157. Pair was last seen around 155.03 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

JPY recovery depends on BOJ and fiscal prudence

"USD/JPY consolidated last week, in absence of additional catalyst. BOJ hike is largely in the price (92% probability priced for 19 Dec) and there may be little room for USD/JPY to venture south unless USD takes another leg lower. We believe USD/JPY is going into upcoming BOJ meeting looking for clues about 2026 not just about Dec meeting outcome."

"And we reiterate that any meaningful recovery in JPY would require not just the BOJ to follow through with stronger guidance but also for policymakers to demonstrate fiscal prudence and for the USD to stay soft. Elsewhere, Reuters poll saw markets expect borrowing cost to rise to 1% by end-Sep 2026."

"Mild bearish momentum on daily chart intact but decline in RSI moderated. We see consolidation in the interim. Support at 154.40 (76.4% fibo retracement of 2025 high to low), 153.90 (50 DMA). Resistance at 156(21 DMA), 157 and 158.87 (previous high in 2025)."