USD/JPY: BoJ in focus tomorrow – OCBC

Consensus leans towards no move while we stuck to our view for a hike. Typically, BoJ MPC decision can matter for USD/JPY but this time, the USD/JPY may also matter for BoJ given the >3% decline in JPY lately. USD/JPY was last seen at 153.94 levels, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Moving averages compression is observed

“For BoJ MPC (Thu), we are looking for BoJ to carry on with policy normalization with a hike. Recent uptick in base pay supports the view about positive development in labor market, alongside still elevated services inflation, better 3Q GDP and expectations for 5-6% wage increases for 2025. For USD/JPY, it is not just JPY or BoJ in the equation, the Fed and US data also matters.”

“While we are of the view that broader direction of travel for USD/JPY is skewed towards the downside as Fed cuts and BoJ hikes. The risk is a slowdown in pace of respective policy normalisation, especially if Fed guides for a much slower pace of cuts or BoJ shows hesitation. Then the USD/JPY may face intermittent upside risks.”

“Mild bullish momentum intact but RSI eased. Moving averages compression (MAC) observed and this typically precedes a breakout trade. Support at 152.70, 152.10 (21, 100, 200 DMAs) and 150.20 (38.2% fibo). Resistance at 154.80, 155.90 levels.”