USD/JPY consolidated at lower grounds as markets lighten positions ahead of inflation reports from Japan and US. Pair was last seen trading t 149.69 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Fed-BoJ policy divergence should push  USD/JPY to the downside

"Divergence in US-JP inflation should continue to weigh on USD/JPY. But going into March, we see a confluence of drivers, including Trump’s tariff threats and dividend seasonality trends that may prove 'noisy' for USD/JPY. That said, macro drivers remain intact."

"Prospects of wage growth, broadening services inflation and upbeat economic activities continue to support BoJ policy normalisation. Fed-BoJ policy divergence should continue to underpin broader direction of travel for USD/JPY to the downside. So, maintain bias to sell rallies in USD/JPY should there be a bounce driven by tariff uncertainty or seasonality trends."

"Daily momentum is bearish while RSI rose from near oversold conditions. Rebound risks not ruled out in the interim but bias to sell rallies. Support at 149.20 (50% fibo), 148.80 before 147 (61.8% fibo). Resistance at 150.50, 151.50 (38.2% fibo retracement of Sep low to Jan high)."