This report summarizes the outlook and trade ideas for USD/JPY this week and presents the view that the pair could recover to the ¥159 range if AI concerns that have held down US long-term yields recede.
USD/JPY’s expected range for this week is ¥156.00–¥159.50, with a central range of ¥157.55–¥158.95. Both ends of the range have been lowered by ¥0.50 from the previous forecast. Concerns over AI have been cited as a factor behind the decline in the US 10-year Treasury yield, and the movement is analyzed as occurring while a December rate hike is being priced in.
USD/JPY recently broke above the range in the previous article at times, but did not rise significantly even after US core CPI for September exceeded expectations, remaining within the range. The focus ahead is whether movements in the US 10-year Treasury yield and Japan’s CPI will affect expectations for a BOJ rate hike in December. The BOJ governor did not refer to the timing, but expectations are estimated at just under 80%.
On 24 October 16, it was suggested that the interest-rate differential between Japan and the US and factors restraining yen weakness would limit movements on both the upside and downside. If Japan’s CPI surprises to the upside as a primary factor, expectations for a BOJ rate hike in December could strengthen and cap USD/JPY’s upside. Conversely, remarks from US Treasury officials warning against yen weakness could bring levels around ¥159 into focus.
Technically, on a daily basis, the 25-day, 200-day, and 100-day moving averages are around ¥157.64, ¥158.58, and ¥159.46, respectively, while the 14-day RSI is in the 50s, in neutral territory. The next turning points are ¥158.95 and ¥157.55. A break above ¥158.95 could open the way toward around ¥159.50, while a break below ¥157.55 is expected to establish a target in the ¥156 range.