Fed and/or BoJ’s pace of policy normalisation to affect USD/JPY – OCBC

USD/JPY rose sharply, in response to news that BoJ officials see little cost to waiting before raising rates. Pair was last seen at 152.20 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

BoJ to carry on with policy normalization

“Bearish momentum on daily chart shows signs of fading but rise in RSI slowed. We reiterated a compression of moving averages, with 21, 50, 200 DMAs converging. This typically precedes a directional break-out trade. Resistance at 152.50/70 levels (21 DMA, 23.6% fibo), 154.70 levels. Support at 152 (50, 200 DMAs), 150.20 (38.2% fibo retracement of Sep low to Nov high).”

“Tomorrow brings Tankan survey before BoJ MPC (19 Dec). But largely, we are looking for BoJ to carry on with policy normalization with a hike next week and into 2025. Recent uptick in base pay supports the view about positive development in labour market, alongside still elevated services inflation, better 3Q GDP and expectations for 5- 6% wage increases for 2025.”

“That said, the risk is a slowdown in Fed and/or BoJ’s pace of policy normalisation would affect USD/JPY’s moves.”