Bank of Japan’s Chair Ueda’s comments on policy normalization caused a mini shockwave on USDJPY this week, but the initial shock seems to be disappearing. Ueda signaled that if wage growth is significant enough, BOJ might have sufficient data to change its ultra-loose policy in early 2024. Swap and bond markets are still feeling the significant effects of the interview, but USDJPY has somewhat recovered.

After falling to break the lower boundary of the trend channel, USDJPY is now back above 147 once again. The hotter-than-expected inflation and core inflation data from the US, coupled with slowing PPI and core machine orders from Japan, have eased the initial shock. However, the combined effects of intervention risks and the chance of an earlier-than-expected policy change could weaken the uptrend to the point of breaking in the coming days.

USDJPY seems to be struggling to gain enough support to break through the 147.90 resistance. If this continues and the 147 support fails, there could be another attempt to break the short-term uptrend in the 145-146 zone, which will be key for future moves. But a breakout above 147.90 could change the equation once again and increase the probability of a test of 150 once more, perhaps triggering another intervention as well.