Synopsis:

ANZ forecasts that USD/JPY will consolidate in the low 150s in the near term, with resistance below the 155 level despite post-election USD strength and rising US yields. While the pair could end the year above 145, improving Japanese wage data suggests potential for BoJ policy normalization, which could lead to JPY strength in December if the BoJ hikes rates.

Key Points:

1. Resistance at 155: USD/JPY has failed to break above 155, with ANZ seeing consolidation in the low 150 range as USD momentum stabilizes.

2. Carry Trade and Yield Spread Support: A favorable US-Japan yield spread is expected to persist, particularly if the Fed’s easing cycle in 2025 is gradual, supporting USD/JPY above 145 into year-end.

3. BoJ Policy Shift Potential: Japanese wage data show promising growth, aligning with BoJ targets and indicating potential for a 25bps BoJ rate hike in December, which is currently priced at less than 50%.

4. December JPY Strength Risk: If the BoJ moves to raise rates at its December 19 meeting, USD/JPY could see downside pressure as markets adjust to anticipated policy normalization.

Conclusion:

ANZ maintains a cautious near-term outlook for USD/JPY, expecting the pair to consolidate without breaking 155. A potential December BoJ rate hike, supported by improving wage data, could strengthen JPY and prompt USD/JPY to retreat from recent highs, while the broader yield spread remains favorable for USD into 2025.