USD/JPY: Technical rebound; fade rallies - OCBC

USD/JPY fell to a low of 149.29 this morning before rebounding to above 150 on Governor Ueda's comments. Markets were looking out for clues from Ueda with regards to the rise in JGB yields. Takata's remarks earlier this week stated that there was no outright discomfort with the rise as yields moving higher is in line with the market's view of the economy. USD/JPY was last seen at 150.35 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.  

Daily momentum is mild bearish

"However, Ueda's comments (this morning) on buying bonds nimbly if yields rise sharply serves as a reminder that BoJ is watching the markets closely and that policymakers can step in if there is any 'excessive volatility' in the bond space. He also said that yields reflect economic recovery, rising price trend - consistent with Takata's earlier comments. Ueda also reiterated that BoJ will raise rates if economic conditions improve as expected."

"USD/JPY's mover higher this morning was more likely a case of knee-jerk technical rebound after the recent >3% drop. Further rebound not ruled out in the near term but more broadly, the direction of travel remains skewed to the downside as BoJ policy normalisation remains on track amid prospects of wage growth and broadened services inflation. Core CPI (this morning) also came in higher than expected at 3.2% (vs. 3.1% expected)."

"Daily momentum is mild bearish while RSI rose. Consolidation likely. Support at 150, 149.20 (50% fibo). Resistance at 151, 151.50 (38.2% fibo retracement of Sep low to Jan high) and 152.60 (200 DMA). That said, we still caution that Trump's tariff threat remains a risk to watch, and that JPY may potentially come under pressure if tariffs hit Japanese goods."