USD/JPY: Interim upside risk – OCBC

USD/JPY took a turn higher as Tokyo core CPI surprised to the downside (2.9% vs 3% exp), further pushing back expectations of BoJ policy normalisation – in terms of the timing of the next rate hike. Pair was last at 147.87 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Slight upside risks ahead

"Daily momentum is flat while RSI rose. Slight upside risks ahead. Resistance at 147.90, 149.40/70 levels (200 DMA, 50% fibo retracement of 2025 high to low). Support at 146.40 (21 DMA), 145.20 (50 DMA)."

"While political uncertainty (referring to PM Ishiba’s political career), rating concerns (dependent on fiscal health) and carry play is supportive of USDJPY, 'sell USD' trade can overwhelm. We acknowledged that a carry trade may be appealing but also warned that the appeal can erode if USD sell-off returns in a big way."