Japanese Yen: BoJ hike bets drive gains against US Dollar - OCBC

OCBC’s Christopher Wong highlights that USD/JPY has broken below 155 and accelerated towards the low-154s as expectations for faster BoJ policy normalisation build, with markets nearly fully pricing a 25bp hike next week. Wong warns that sustained trading below 155 could turn prior support into resistance and open further downside, even as stronger US inflation could trigger a rebound.

BoJ expectations drive Yen gains

"USD/JPY fell through the 155 handle overnight, with the break accelerating the decline towards the low154s."

"Expectations for faster BoJ policy normalisation continued to build, with markets now close to fully pricing a 25bp hike at next week’s BoJ meeting, while comments from PM Takaichi’s economic adviser Takuji Aida, who expects a Sept hike followed by further tightening, added to the shift in rate expectations."

"More broadly, sentiment towards JPY appears to be turning less bearish, amid signs of some domestic capital repatriation and reduced appetite for yen-funded carry trades."

"Daily momentum is mild bearish while RSI is near oversold conditions. Rebound risks not ruled out but sustained price action below key support at 155 levels (23.6% fibo retracement of 2026 low to high) may open door to further downside. Next bigger support lies at 152.20 levels (2026 lows). Resistance at 155, 156.70 (38.2% fibo)."

"This week, US PPI/CPI remains an important data/event risk. A stronger-than-expected inflation print could still trigger some USD/JPY rebound."