Japanese Yen: BoJ hike bets drive gains against US Dollar - OCBC
OCBC’s Christopher Wong highlights that USD/JPY has broken below 155 and accelerated towards the low-154s as expectations for faster BoJ policy normalisation build, with markets nearly fully pricing a 25bp hike next week.
Japanese Yen gains against US Dollar as BoJ rate hike expectations intensify. OCBC's Christopher Wong notes that USD/JPY has broken below 155 and is heading towards the low-154s due to heightened anticipation for a more aggressive Bank of Japan policy normalization. The markets have nearly fully priced in a 25 basis point hike at the upcoming BoJ meeting, following comments from PM Takaichi's economic adviser Takuji Aida.
Aida expects a September hike followed by additional tightening. In addition, there are signs of domestic capital repatriation and a reduced appetite for yen-funded carry trades, which is turning sentiment towards JPY less bearish. The currency pair experienced mild bearish momentum, with the RSI approaching oversold conditions.
However, a sustained price action below the key support level of 155 could open the door to further downside. The next significant support is at 152.20, while resistance can be found at 155 and 156.70. This week, US PPI/CPI data will be crucial for USD/JPY, as a stronger-than-expected inflation print could trigger a rebound in the currency pair.
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