USD/JPY consolidates amid hawkish BoJ signals – OCBC

USD/JPY steadied after BoJ Governor Ueda signaled a possible December rate hike, lifting market expectations to an 81% probability. Pair was last seen at 155.98 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

December rate hike odds surge to 81%

"USD/JPY consolidated after the recent slippage, owing to hawkish shift in BoJ rhetoric. Market pricing for December hike (19 December MPC meeting) has also swung up to 81% probability. Governor Ueda’s speech yesterday was the trigger as he highlighted that BoJ will consider the pros and cons of raising the policy interest rate. He said that real rate is very low and a hike would be an adjustment of the degree of easing (i.e. conditions still accommodative)."

"He also said that the likelihood of the BoJ’s economic outlook being realized is rising. Ueda’s speech appears to be a 'game-prep' ahead of potential hike, making Dec or Jan meeting highly plausible. That said, comes the next question if this is a one hike and another long wait. We look for December hike. But any sustained JPY recovery would likely need BoJ to follow through with stronger guidance and for policymakers to demonstrate fiscal prudence. "

"A softer USD environment will definitely be most helpful. Daily momentum is mild bearish while RSI fell. Risks skewed to the downside. Support at 155.30 levels (21 DMA), 154.40 (76.4% fibo) and 151.60 (61.8% fibo retracement of 2025 high to low, 50 DMA). Resistance at 156.70, 157.90 and 158.87 (previous high in 2025)."