Japanese Yen: Strength builds against US Dollar ahead of BoJ decision – Scotiabank

Scotiabank's analysts, Shaun Osborne and Eric Theoret, have observed that the Japanese Yen is currently outperforming the US Dollar. As a result, the USD/JPY rate has been moving closer to a crucial support level near 153 and the 2026 low of approximately 152. The market appears to have priced in a 25 basis point rate hike by the Bank of Japan on September 18th.

The strategists believe that there is a higher risk of the Yen gaining further value, as market positioning is increasingly unfavorable for the Yen. The Japanese Yen has risen by about 0.2%, seemingly unaffected by the recent surge in oil prices. Risk for the Yen remains predominantly to the upside, as market participants evaluate sentiment and positioning that have shifted from official intervention support towards a fundamentally-driven BoJ-led increase.

The limited data releases and an empty calendar into the week ahead suggest minimal event risk before the BoJ decision on September 18th, where a 25bp rate hike is already priced in. For USD/JPY, recent price movements indicate support around 153, as there are no further support levels prior to the 2026 low near 152. In terms of resistance, the analysts now anticipate it at 155, as it has previously functioned as a support level.

Meanwhile, AUD/USD is consolidating above 0.7200 during the Asian session on Wednesday, bolstered by hot Chinese CPI and PPI data and a tailwind from Yen-inspired US Dollar weakness. Traders are awaiting the release of US inflation figures later in the week for additional support. USD/JPY has overcome the bearish pressure and is trading above 153.50 in the American session on Wednesday.

Rising gold prices have marked a rebound on Wednesday, breaking a three-day losing streak and surpassing the $4,400 mark per troy ounce. The precious metal's recovery is attributed to further selling pressure on the US Dollar and persistent uncertainty in the geopolitical arena.