USD/JPY fell, tracking the gap lower in UST yields. Focus next on BoJ MPC (Fri). We are looking for 25bp hike on Friday. USDJPY last seen at 155.46 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is bearish

"Economic data has been supportive. Jobless rate easing, trade unions calling for another 5-6% wage increase. Fast Retailing (Uniqlo) announced it will raise starting pay for new employees by 10% and 5% for other employees. Meiji Yasuda announced raising wages by an average of 5% for all 47k staff starting April."

"Elsewhere, JP CPI, PPI were all higher, paving the way for BoJ policy normalization. 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. The risk is a dovish hike, as this may suggest that USDJPY’s move lower may be more constrained."

"Daily momentum is bearish while RSI fell. Risks skewed to the downside. Next support at 154.30 (23.6% fibo retracement of Sep low to Jan high) and 152.80 (200 DMA). Resistance at 157.15 (21 DMA), 158.80 (recent high)."