USD/JPY: Political risks are still present – OCBC

USD/JPY was a touch softer amid pullback in UST yields while Japan wages continue to rise (4.1% y/y vs. 3% expected). The rise in wages remain consistent with Governor Ueda’s comments and this keeps hopes for policy normalisation alive. Pair was last at 148.18 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

US data risk to watch tonight

"Daily momentum and RSI indicators are not showing a clear bias for now. 2-way risks likely, with US data risk to watch tonight. Bias to lean against strength. Resistance at 148.80 (200 DMA), 149.20 levels. Support at 147.20 (50 DMA), 146.70 (38.2% fibo retracement of April low to August high)."

"Moving on, focus is on 8 September as LDP members submit responses to decide if the party presidential election should be brought forward. Earlier this week, 4 LDP members including Secretary-General Hiroshi Moriyama indicated their intention to step down after the review report on the upper house election in July was presented. Report had indicated nine factors on why voters are not supporting the LDP."

"This included the loss of trust brought on by money scandals, measures to deal with higher CPI, etc. It remains unclear if PM Ishiba will resign and if any new leadership will bring about any positive change. The risk of an earlier LDP election may temporarily undermine the JPY but politically-driven JPY depreciation is likely to reverse when the domestic house is in order."