BUZZ-COMMENT-Yen remains underpinned by BOJ policy outlook

The possibility of the Bank of Japan tightening policy, rising JGB yields, and a potential resolution to the Ukraine conflict are likely to keep USD/JPY on a downward path.

Economic data from Japan, along with comments from both former and current BOJ officials, suggest a rate hike could occur in the coming months. The likelihood of a 25 basis point increase at the June policy meeting is roughly even. A speech by BOJ board member Hajime Takata on Wednesday will be closely analyzed for any hints on the timing of such a move.

Inflation concerns are also pushing JGB 10-year yields to multi-year highs, increasing the likelihood of inflows from asset managers. According to recent weekly CFTC data, asset managers were largely behind the significant shift toward yen long positions.

The yen’s attractiveness is further bolstered by the potential for a weaker USD if the Ukraine conflict reaches a resolution.

That said, it's not as if there aren't risks for yen bulls.

The Trump administration's trade policies could fuel commercial and investment flows that support the dollar. Additionally, the BOJ’s stance on tightening will depend on Japan’s economic data. If inflation figures later this week are softer than expected, the yen could fall.

In terms of the technical picture, USD/JPY momentum is currently lacking, with the pair in the middle of its 139.56-158.89 range over the past six months and volatility under pressure. The current year-to-date low of 150.92 offers nearby support, while resistance lies at the 9-day exponential moving average at 152.22, ahead of the 200-day moving average at 152.68.

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