According to OCBC’s FX analysts Frances Cheung and Christopher Wong, the recent rebound of USD/JPY was abruptly halted after BoJ’s Tamura announced the need to raise rates to 1% by 2026.
The Future Outlook for USD/JPY Points Downward
Tamura’s hawkish stance on the neutral rate being at least 1% has shifted market sentiment. BoJ’s Nakagama also emphasized the need for adjustment in easing policies based on economic performance.
The current USD/JPY levels stand at 142.78, with daily momentum showing no clear bias and RSI remaining flat. A death cross pattern has formed, indicating a bearish trend. Resistance levels are at 143.70, 145, and 146.40, while support lies at 141.50 and 140.70.
With potential policy shifts from the Fed and BoJ, the narrowing of UST-JGB yield differentials could further drive USD/JPY downwards in the future.
Analysis:
The recent statements from BoJ officials have created uncertainty in the USD/JPY market, leading to a pause in the rebound. Traders should be cautious of resistance levels and monitor any further policy changes that could impact the currency pair. Overall, the outlook for USD/JPY suggests a downward trend in the coming days, influenced by central bank decisions and yield differentials.