At Jackson Hole last weekend, Governor Ueda spoke about wage growth spreading from large enterprises to SMEs and barring a major negative demand shock, he expects labour market in Japan to remain tight and to continue to exert upward pressure on wages. Pair was last at 147.90 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Bias to sell rallies

"We opine that this keeps BoJ policy normalisation hopes alive. Data focus this week on Tokyo inflation (Friday) while moves in USD, treasury yields should continue to drive USD/JPY in the near term. But at the same time there is also some focus on the election review report, which was supposed to be released end Aug but has now been delayed to early September. This report is to inform the LDP on who will take responsibility for the upper house election setback in July."

"There was media report earlier saying that PM Ishiba will step down in end-August, which he denied. Two days ago, PM Ishiba’s cabinet approval rating rose over 15ppts. For now, markets are not pricing in much for a move at the next meeting on 19 Sep and only fully pricing in a hike by Jan 2026. Political uncertainty sometimes hold back BoJ from a move. So, getting some clarity on PM Ishiba’s political career and if inflation data continues to come in hot alongside Fed turning more dovish, then we should well expect USD/JPY’s direction of travel to be skewed lower."

"Bearish momentum on daily chart shows signs of fading while RSI is flat. 2-way trades likely in the interim, with bias to sell rallies. Resistance at 148.32 (23.6% fibo) and 149.10. Support at 146.70/90 (50 DMA, 38.2% fibo retracement of Apr low to Aug high), 145.40/50 levels (100 DMA, 50% fibo)."