USD/JPY Hits Key Support Ahead of BoJ Rate Decision

The Japanese yen has strengthened against the US dollar, rising by 0.2%, as the USD/JPY pair nears its technical support level of 153.

This move comes despite a rally in oil prices, which typically affects Japan's terms of trade, and with limited scheduled data releases, markets are focused on the upcoming policy catalyst - the Bank of Japan meeting on September 18.

Markets fully expect a 25-basis-point rate hike from the Bank of Japan, and Scotiabank points out that there is scant additional support for USD/JPY ahead of its 2026 low around 152, with 155 being the next resistance level after previously acting as support.

However, analysts see strong upward momentum building in the yen against the dollar as we approach the Bank of Japan's rate decision. Recent futures market data shows that speculative traders have been rapidly unwinding their short yen positions, which is fueling this upward momentum.