Pending Catalyst – OCBC

USD/JPY’s rally was halted after BoJ’s Tamura said the BoJ must raise the rate to 1% by the end of the forecast period (2026), note OCBC FX analysts Frances Cheung and Christopher Wong.

The broader direction of travel for USD/JPY takes us to the downside

“He also said that the neutral rate is at least 1%. He is perceived as a member with a hawk. Yesterday, the BoJ’s Nakagama 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.”

“The pair was last seen at 142.78 levels. The daily momentum is not showing a clear bias yet, while the RSI is steady. The death cross formed earlier with the 50-DMA cutting the 200-DMA to the downside. Bias to sell rallies. Resistance at 143.70, 145 (21-DMA) and 146.40 (23.6% fibo retracement from July high to August low). Support at 141.50, 140.70.”

“We reiterate that Fed-BoJ policy changes and the increasing pace of normalization may lead to a faster narrowing of UST-JGB yield spreads and this should continue to support the broader USD/JPY downtrend .”