Japanese Yen: Bearish outlook against USD as BoJ hike priced – Scotiabank

Scotiabank’s Shaun Osborne and Eric Theoret say the Japanese Yen (JPY) is soft and underperforming most G10 currencies despite stronger Producer Price Index (PPI) data, with markets fully pricing a 25 bps Bank of Japan (BoJ) hike next week and another by December. For USD/JPY, they highlight a bullish technical configuration with a rising RSI nearing overbought territory and limited resistance seen ahead of 162.

Yen weak as USD/JPY eyes 162 level

"The yen is soft, trading defensively vs. the USD while underperforming most of the G10 currencies into Wednesday’s NA session."

"The May PPI figures came in stronger than expected, pricing 6.3% y/y—a pace that is likely to maintain hawkish expectations into next week’s BoJ."

"Media have reported of a hospitalization for Gov. Ueda, leaving the central bank without its chief at next Tuesday’s decision. A 25bpt hike is widely expected and fully priced, with markets pricing an additional 25bpt hike by December."

"For USD/JPY, the technical setup is bullish, with a rising RSI that appears to be closing in on the overbought threshold at 70. We see limited resistance ahead of 162."