Title: USD/JPY Continues Downward Trend Amid US Payroll Disappointment and Geopolitical Concerns – Expert Analysis
USD/JPY has taken another hit as US payrolls fall short of expectations, with ongoing geopolitical tensions adding to the safe-haven appeal of the Japanese Yen (JPY), according to OCBC FX strategists Frances Cheung and Christopher Wong.
The shift in Fed-BoJ policies from divergence to convergence has altered the overall direction of USD/JPY, with a recent decline in the currency pair mirroring UST-JGB yield differentials. This suggests a potential for USD/JPY to continue trading lower, with a theoretical fair value estimate of around 136 based on yield differentials.
Despite the downward bias, caution is advised in the short term as there is a possibility of a retracement from current levels. Key resistance levels to watch include 148.54, 145, and 144.50, with a bias towards selling rallies. The upcoming US ISM services data will be closely monitored for further market direction.
In summary, the USD/JPY pair is expected to face continued pressure due to a convergence in central bank policies and yield differentials, with potential downside towards 136. Traders should exercise caution and monitor key resistance levels for potential retracements in the short term.