Recent decline in USD/JPY shows tentative signs of taking a pause but the decline has also seen a recoupling of USD/JPY back to UST-JGB yield differentials, OCBC FX strategists Frances Cheung and Christopher Wong note.
USD/JPY trades bearishly towards the 153.66 support
“During the period of May - Jul, USD/JPY has gone one way higher while UST-JGB yield differentials narrowed – a decoupling of its traditionally positive correlation – which was unusual. The recent sharp decline in USD/JPY has somewhat reset that anomaly. And if we do expect USD/JPY to play catchup to the historical correlation with UST-JGB yield differentials, then USDJPY may still have room to trade lower.”
“The combination of BoJ policy normalization and Fed possibly cutting rate in due course is a case of monetary policy convergence and should underpin USD/JPY downside. The risk is that BoJ fails to live up to expectations and USDJPY risks a sharp correction upwards. Bearish momentum on daily chart intact while RSI fell into near oversold conditions.”
Cautious of rebound risks for USDJPY from oversold conditions but at the same time, JPY shorts remain at record and uncertainty may see continued unwinding of stretched short position in JPY. Bias to fade rallies. Resistance at 155.50 (100 DMA), 156.80 (76.4% fibo). Support at 153.66 (61.8% fibo retracement of 2024 low to high), 151.60 (200DMA) and 151.10 (50% fibo).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD shifts its outlook to bearish
AUD/USD remained under pressure near 0.6540 on Monday, still trading below the key 200-day SMA on the back of renewed strength in the US Dollar and further weakness in the commodity complex.
EUR/USD risks a deeper pullback below 1.0800
A negative start to the week saw EUR/USD slipping back to the 1.0800 region, breaking below the key 200-day SMA (1.0820) and exposing further weakness in the short-term horizon.
Gold accelerates south after losing $2,400
Gold started the week on a bullish note as markets reacted to escalating tensions in the Middle East. After rising above $2,400, however, XAU/USD retreated below this level, pressured by the renewed US Dollar strength ahead of this week's critical events.
Ripple lawsuit could end in a ruling or settlement this week, final showdown sees XRP sustain above $0.60
Ripple (XRP) lawsuit brought by the Securities & Exchange Commission could end in July 2024. XRP traders are watching the lawsuit closely for updates on settlement or a final ruling by Judge Analisa Torres.
Are government statistics concealing the truth about the economy?
Americans are questioning all sorts of government functions these days. For example, the majority of people, according to polls, have doubts as to whether U.S. elections are free and fair. Some believe the federal justice system has been weaponized and used against those in political opposition.