USD/JPY Rebound Faces Pressure from BOJ Normalization Expectations
The Japanese Yen (JPY) is facing renewed pressure against the US Dollar (USD), according to OCBC's Christopher Wong. The USD/JPY pair has seen a rebound, driven by higher US Treasury yields and stronger USD, as well as elevated oil prices that add to inflation concerns for Japan.
Wong notes that firmer UST yields following the recent PPI release have provided support for the USD/JPY rebound. However, expectations for further Bank of Japan (BOJ) normalization are capping upside in the pair.
The focus now shifts to the upcoming US Consumer Price Index (CPI) data, which will be pivotal in determining whether the recent rebound extends or fades. An upside surprise in core inflation could push UST yields higher and extend the USD/JPY rebound, while a softer print would likely unwind some of the recent rates repricing.
Wong also flags the potential risks of bullish divergence on technicals, with tentative signs of it forming on MACD and RSI. Resistance levels are seen at 155 (23.6% fibo retracement) and 156.70 (38.2% fibo), while support is found at 153 and 152.20 levels.