Bias: bullish-to-range-bound, as USD/JPY sits above its 90-day average and in the upper half of the three-month range.
Key drivers:
- Rate gap: The US Federal Reserve is seen staying relatively hawkish versus the BoJ, which tightened, keeping the dollar attractive against the yen.
- Oil trend: Oil is near recent highs with notable volatility, a backdrop that tends to push the dollar higher and weigh on the yen.
- Macro: Tokyo inflation cooled in December, reducing near-term pressure on BoJ to tighten further.
Range: USD/JPY is likely to drift within the three-month range, edging toward the upper end but staying inside the range.
What could change it:
- Upside risk: A strong US payrolls report or hawkish Fed rhetoric could push USD/JPY toward the upper end.
- Downside risk: Softer US data or signs of further BoJ tightening could push USD/JPY lower.
