USD/JPY rebounded overnight, tracking the rise in UST yields after US PPI data came in hotter. Pair was last at 146.87, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Economic activities in Japan may support BoJ policy normalization

"Subsequent clarification that Scott Bessent did not ask Japan to hike rates also added to the USDJPY’s rebound. Pair rose to near 148 at one point overnight but has now eased lower. Stronger than expected 2Q GDP aided the pullback in USDJPY this morning. This reinforced our view that there is room for BoJ to pursue policy normalization."

"We indicated before that wage growth, broadening services inflation and upbeat economic activities in Japan should continue to support BoJ policy normalization. We reiterate our view that a resumption of Fed-BoJ policy divergence should underpin the direction of travel for USDJPY to the downside."

"Daily momentum is mild bearish while RSI fell. Risks remain skewed to the downside. Immediate support at 146.40 (50 DMA), 145.50 (100 DMA) and 144.10 (61.8% fibo retracement of April low to August high). Resistance at 147.80 (21 DMA), 148.32 (23.6% fibo)."