USD/JPY continued to fall, in line with our bias for downside bias. Pair was last at 151.35 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Risks remain skewed to the downside

“Daily momentum is bearish while RSI fell. Risks remain skewed to the downside. Support at 150.70 (50% fibo). Resistance at 153.30 (61.8% fibo retracement of 2024 high to low), 153.85 (61.8% fibo), 155 levels.”

“PM Ishiba said that he swapped views with business and union leaders on pay talks and ask businesses to continue with pay hikes. He is also calling for bigger wage deal than this year’s. To add, PPI services came in higher at 2.9% y/y (vs. 2.5% expected). Price-related data, wage growth expectations continue to reinforce our view that BoJ should proceed with another hike next month.”

“Divergence in Fed-BoJ policies should bring about further narrowing of UST-JGB yield differentials and this should underpin the broader direction of travel for USD/JPY to the downside. To add, tariff threats, geopolitical uncertainties are additional drivers that should be supportive of JPY strength.”