Feb 21 (Reuters) - The prognosis for USD/JPY is a lower range going forward after it broke below 150.00 Thursday for the first time since December 2024. Retracements are to be expected but the ceiling looks to be lower now with many eyeing 152.00.

Expectations of more Bank of Japan policy rate hikes are getting stronger each day, and Japanese government bond yields have been marching higher as a result. JGB-U.S. Treasury interest rate differentials have narrowed considerably, and could tighten more with the U.S. Federal Reserve in pause mode and U.S. yields mostly sideways while JGB yields continue firming.

The market still sees the chance of a BOJ hike in March as slim but expectations for a move in May, June or July have risen considerably. An early hike could also prompt expectations of more this year, depending on economic and inflation data, of course.

USD/JPY moving relatively easily through 150.00 Thursday and to 149.29 EBS in Asia Friday surprised many in the market. Many Tokyo players were expecting heavy bids on the 150 handle to curtail a break below, especially with the market recently having gone long yen.

USD/JPY has since recovered, bouncing to 150.45 on short-covering ahead of Tokyo's long weekend. More retracements up cannot be ruled out but the ceiling looks to be lower now with considerable resistance eyed above 152.00, the site of recent peaks.

The overall USD/JPY bias looks to remain down however with specs already eyeing an eventual break below 149.00 to 148.65, the spike low on December 3, 2024. The weekly Ichimoku cloud between 151.11-78 next week looks to work as pivot. Previous comments , , , .
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(Haruya Ida is a Reuters market analyst. The views expressed are his own)