USD/JPY bears continue to face challenges from the cautious tone of Bank of Japan Governor Ueda.

On Monday, Ueda told business leaders that the central bank would consider raising rates if the economy evolves as forecast, noting that sentiment is improving and wage-driven inflation is gaining momentum. Key data points to watch this week include national CPI and PMI on Friday, followed by services PPI next week.

However, Ueda also expressed caution about hiking too quickly since it may have negative long-term consequences. This more dovish stance is keeping yen bulls in check. While two-month risk reversals that cover the December BOJ meeting have shifted modestly in the currency’s favor, implieds

remain relatively subdued.

Markets appear to be more interested in USD/JPY movements after President-elect Donald Trump assumes office in January.

This sense of short-term directional uncertainty is evident in futures as well. CFTC data released Friday showed accounts were building short yen positions though open interest levels are low.

Until USD/JPY moves below its 200-DMA at 151.87 or above 157, traders will be reluctant to push the envelope. With liquidity waning, such outlier moves are possible.

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(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

((robert.fullem@thomsonreuters.com;))