USDJPY:
The pair slipped to 150.10–150.20 as demand for the yen is supported by the weaker US dollar and signals from the Bank of Japan that it is attentive to the conditions for further normalization of policy. The regulator’s comments revive expectations that monetary conditions in Japan will be gradually tightened as inflation and wages stabilize. Against this backdrop, cross-border flows into yen-denominated assets have slightly increased and USDJPY has corrected lower.
Stability in Japan’s financial markets and a tendency among domestic investors to reduce FX hedges when US yields are lower also work against the pair. The tape has repeatedly shown that USDJPY is sensitive to expectations around BoJ steps and to overall risk appetite: when systemic risks intensify, the yen typically benefits from supportive inflows.
From the US side, a softer dollar outlook due to the threat of a prolonged budget dispute and measured signals from some Fed speakers weighs on Treasury yields and on dollar appeal. As a result, the base case is continued pressure on USDJPY with potential extension toward 149.25 if the news flow remains neutral.
Trading recommendation: SELL 150.10, SL 150.30, TP 149.25.
Origin: FreshForex
