USD/JPY: Bias to sell rallies in USD/JPY – OCBC

Markets continue to see a confluence of risk factors, including Trump’s tariff threats and dividend seasonality trends that may prove 'noisy' for USD/JPY, OCBC's FX analysts Frances Cheung and Christopher Wong note. 

Macro drivers remain intact

"USD/JPY touched a high of 151.02 this morning but was brief as the pair reverted to trade lower. Last at 150.35 levels. Daily momentum is flat while rise in RSI moderated. Bias remains to sell rallies. Resistance at 150.50, 151.50 (38.2% fibo retracement of Sep low to Jan high). Support at 149.20 (50% fibo), 148.80 before 147 (61.8% fibo)." 

"That said, macro drivers remain intact. Prospects of wage growth, broadening services inflation and upbeat economic activities in Japan continue to support the BoJ policy normalization while fading US exceptionalism validates our bias for the Fed cut cycle to continue." 

"Fed-BoJ policy divergence should underpin broader direction of travel for USD/JPY to the downside. So, maintain bias to sell rallies in USDJ/PY should there be a bounce driven by tariff uncertainty or seasonality trends."