Break below the double bottom can open up an additional disadvantage – OCBC

USD/JPY fell sharply this morning after Nakagama’s comments from the BoJ added to the policy normalization trend, note OCBC FX strategist Frances Cheung and Christopher Wong.

The risks are tilted to the downside

“The drop in USD/JPY may have also triggered sell stop orders, leading to a fairly sharp move to trade below the 141.50 low. He said that real rates are at a very low level and that the BoJ will continue to adjust the degree of easing if the economy and prices perform as expected. Overnight, USD/JPY has already traded strongly with lower UST yields likely to account for the sharp drop in oil prices.”

“We reiterate that the FedBoJ’s policy changes and the increasing pace of normalization may result in a faster narrowing of UST-JGB yield spreads and this should continue to support the broader USD/JPY downtrend. The pair was last seen at 141.80. The daily momentum is not showing a clear bias for now, while the RSI has declined.”

“The death cross formed earlier with the 50-DMA cutting the 200-DMA to the downside. The risks are tilted to the downside. Support at 141.50 (minimum of August, September). Break below puts 140.20. Resistance at 143.70, 145 (21-DMA) and 146.40 (23.6% fibo retracement from July high to August low).”