USD/JPY: Near term consolidation – OCBC

USD/JPY rebounded slightly overnight, but largely still in consolidation after the post-NFP move. Pair was last at 147.76 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

USD/JPY retains bias still to sell rallies

"Daily momentum is mild bearish while RSI is flat. Near term consolidation; but retain bias still to sell rallies. Resistance at 148 (21 DMA) 149.40/50 levels (200 DMA, 50% fibo retracement of 2025 high to low). Support here at 147.10 (38.2% fibo), 145.70/90 levels (50, 100 DMAs)."

"Carry trade allure is now reduced as softer US data builds the case for Fed to resume rate cut cycle, though US stagflation risks may result in Fed delaying cycle while BoJ is likely to continue to hike rate in due course. Digital Minister Kono said that what we need is tight monetary policy to bring the JPY stronger. Last week, Niinami, chair of the Japan Association of Corporate Executives, told Bloomberg TV that the weak JPY is hurting households by driving up costs."

"'Every tariff issue will be settled and then I believe the BoJ must increase interest rates', To some extent, political uncertainty (referring to PM Ishiba’s political career/ LDP leadership) and credit rating concerns (dependent on fiscal health) can be supportive of the pair, but “sell USD” momentum and narrowing UST-JGB yield differentials can also counter. We look for opportunities on rally to fade into."