USD/JPY: More Downturn – OCBC

USD/JPY fell in response to Powell’s dovish comments last Friday and continued its decline this morning following the escalation of geopolitical tensions between Israel and Hezbollah over the weekend, noted Frances Cheung and Christopher Wong, FX strategist at OCBC.

Remain biased towards downside play in USD/JPY

“Bullish momentum on daily chart faded as RSI fell. Risks tilted to the downside. Support at 142, 140.40 (61.8% fibo). Resistance at 144.50 (50% fibo retracement of 2023 low to 2024 high), 147.20 levels (21 DMA). We remain biased for downside play in USD/JPY.”

“Governor Ueda’s comments in parliament on Friday reinforced the view that BoJ rate hikes are still on the table, while Powell’s ‘the time has come’ speech in Jackson Hole reinforced the view that the Fed’s next move is a cut.”

“The broader direction of travel for USD/JPY has changed as Fed-BoJ policy has shifted from divergence to convergence and this should continue to support the downtrend for USD/JPY. Moreover, geopolitical concerns are another factor that could increase support for the safe-haven JPY.”