USD/JPY: Focus on Tokyo CPI tomorrow – OCBC

USD/JPY slipped overnight amid pullback in UST yields. There was news of top trade negotiator Akazawa cancelling his trip to Washington as there were points that needed to be debated at the administrative level. This saw little FX reaction. Pair was last at 147.10 levels.

Bias is to sell rallies

"Bearish momentum on daily chart remains intact while RSI fell modestly. 2-way trades likely in the interim, with bias to sell rallies. Support at 146.70/90 (50 DMA, 38.2% fibo retracement of Apr low to Aug high), 145.40/50 levels (100 DMA, 50% fibo). Resistance at 147.90 (21 DMA), 148.32 (23.6% fibo) and 149.10."

"Focus this week on Tokyo CPI. At Jackson Hole last weekend, Governor Ueda spoke about wage growth spreading from large enterprises to SMEs and barring a major negative demand shock, he expects labour market in Japan to remain tight and to continue to exert upward pressure on wages. We believe this should continue to keep BoJ policy normalisation hopes alive."

"A divergence in Fed-BoJ monetary policy should underpin the broader direction of travel to USD/JPY. Elsewhere, we keep a look out on the release of the election review report, which should be ready by early-Sep. This report is to inform the LDP on who will take responsibility for the upper house election setback in July."