Japanese Yen: BoJ guidance crucial for further gains against US Dollar – OCBC
OCBC strategist Christopher Wong notes that JPY has extended gains, pushing USD/JPY near recent lows despite firmer Fed hike pricing and higher US front-end yields. Markets are positioned for a 25bp Bank of Japan (BoJ) hike, with speculative positioning now net long JPY.
The Japanese Yen (JPY) has been on the rise, pushing the USD/JPY exchange rate to recent lows. Despite expectations of a stronger Federal Reserve rate hike and increased US front-end yields, markets are now favoring a 25 basis point (bp) increase from the Bank of Japan (BoJ). This has led to a net long position in JPY among speculators.
However, further downside in USD/JPY may only occur if the BoJ appears sufficiently hawkish and if the US dollar and US yields weaken. Traders are keeping a close eye on the Bank of Japan Monetary Policy Committee meeting, where Governor Ueda's guidance will play a crucial role in determining the path forward for further normalization.
Currently, USD/JPY is trading at 153.60, with a daily bearish momentum and RSI near oversold conditions. Support levels are at 153 and 152.20 (2026 low), while resistance levels are at 155 (23.6% Fibonacci retracement of 2026 low to high), 156.70 (38.2%).
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