• USD/JPY edged higher on Wednesday as economic risks due to Mideast tensions undermine the yen.
• So far, there has been no evidence of Japanese FX intervention, with market participants noting that it remains difficult for the Ministry of Finance to act against a broadly strong USD environment.
• At the same time, speculation is increasing that the Bank of Japan may need to tighten policy more than currently expected, with some pricing in a possible 25 bps hike as early as next week.
• The BOJ is widely expected to raise its main rate by 25 basis points to 1% at its June 15-16 meeting and a second hike sometime this year has also been well priced in.
•Swap markets on Tuesday were pricing in a 93% chance of a BOJ rate hike this month, up from expectations in May of around an 80% chance.
• Immediate resistance is located at 160.40(23.6%fib), any close above will push the pair towards 160.70(Higher BB).
• Support is seen at 159.54 (SMA 20) and break below could take the pair towards 158.82(38.2%fib).
Recommendation: Good to buy around 160.20, with stop loss of 159.70 and target price of 160.70


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