Will 140 Give Way? – OCBC

USD/JPY fell, driven by decline in the USD leg as expectations for larger Fed cut returned to the table, and was last seen at 140.70, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Bias to the downside

“Daily momentum is not showing a clear bias for now but RSI fell. Death cross earlier formed is getting more ‘entrenched’. Bias to the downside. Support at 140.70, 140.30 levels. Resistance at 143.50, 144.40 (21 DMA). Markets will be eyeing 140 level.”

“A decisive break on that level may trigger other USD/AXJs to break their recent support. Recent BoJspeaks reinforced normalisation bias. BoJ’s Tamura said that BoJ needs to lift rate to 1% by outlook period end (2026) while BoJ’s Nakagawa said that real rates are at very low level and that BoJ will continue to adjust the degree of easing if the economy and prices perform in line with expectations.”

“Fed-BoJ policy shifts and growing pace of normalisation can bring about faster narrowing of UST-JGB yield differentials and this should continue to underpin the broader direction of travel for USD/JPY to the downside.”