USD/JPY: Oil prices defends against hawks – Societe Generale

Societe Generale analysts note USD/JPY failed to sustain a breakout above its multi‑year range and is consolidating above the 50‑day moving average. They highlight a crucial support zone around 158.30/157.50 and resistance near 160.50. They lnote that the downward pressure stemming from the hawkish 6-3 BoJ split is being offset by oil-driven dynamics, keeping USD/JPY supported.

Crucial support and resistance levels

"For the BoJ, the dissent of three hawks supposedly keeps the central bank on course to rates to 1% in June or July on the condition that peace talks make progress in the Gulf and oil prices come off the boil. The central bank revised up its inflation forecast and sees medium- to long-term inflation expectations settling around 2% between 2H FY26 and FY27."

"Hawks will however remain in the minority if oil prices remain elevated and large-scale supply chains disruptions occur. The BoJ warns in its risk analysis of slower growth through a significant decline in corporate profits and households' real income. This could push down underlying CPI inflation."

"USD/JPY attempted a breakout above the upper boundary of its multi-year range, but the move lacked follow through. This has led to the formation of a small consolidation base above the 50 DMA."

"The moving average, together with the lower edge of this base at 158.30/157.50, represents a crucial support zone. There would be risk of a deeper decline if this is breached. The recent pivot high near 160.50 acts as an interim resistance."

"Retracement cut short as oil weighs, profit taking stalls prior to 50dma (158.39). Hawkish 6-3 BoJ split lifts implied June odds to 73% from 62%."

"Support 157.50, resistance 160.50."

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