USD/JPY: Bias to sell rallies – OCBC

USD/JPY remains caught in a 2-way trade between safe haven demand and JPY being directly hit by reciprocal tariffs. Pair was last at 149.60, OCBC's FX analysts Frances Cheung and Christopher Wong note.

JPY is likely to strengthen in risk-off trades

"Bullish momentum on daily chart intact but decline in RSI moderated. 2-way trades likely. Retain bias to sell rallies. Death cross formed (50 cuts 200 DMA to the downside). Support at 149.10/20 levels (21 DMA, 50% fibo), 148.70 and 147 levels (61.8% fibo). Resistance at 151.20/50 levels (38.2% fibo retracement of Sep low to Jan high, 50, 200 DMAs), 153 (100 DMA)."

"Japan was one of the countries that was singled out by Trump for taking advantage of the US. For instance, Japan imposes over 20% tariff rate on several agricultural products including beef and cheese, around 30% on leather shoes and about 10% on clothing and commercial trucks."

"There have been chatters of production adjustments or supply chain shifts in attempt to avoid being hit by reciprocal tariff adjustment, but it remains uncertain if this would be useful. Hence 2-way trades for USD/JPY is still likely in the interim unless Japan is exempted from reciprocal tariffs. In this scenario, JPY is likely to strengthen in risk-off trades."