USD/JPY eased lower this morning after PPI came in higher than expected. Last seen at 151.45 levels, OCBC’s FX analyst Christopher Wong notes.

Bias to sell rallies remains on the table

“Bearish momentum on daily chart shows signs of fading but rise in RSI slowed. Moving averages compression observed, with 21, 50, 200 DMAs converging. This typically precedes a directional break-out trade. Resistance at 152 levels (50, 200 DMAs) and 152.60/70 levels (21 DMA, 23.6% fibo). Support at 150.20 (38.2% fibo), 148.70 levels (100 DMA) and 148.20 (38.2% fibo retracement of Sep low to Nov high). We retain a bias to sell rallies.”

“Friday brings Tankan survey before BoJ MPC (19 Dec). But largely, we are looking for BoJ to carry on with policy normalization with a hike next week and into 2025. 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.”

“The risk is a slowdown in Fed and/or BoJ’s pace of policy normalization as a slowdown may affect USD/JPY’s moves.”