The Japanese yen strengthened modestly, up 0.2% against the US dollar, as USD/JPY edged towards technical support near 153. The move came even as oil prices rallied, a development that typically affects Japan’s terms of trade, and with limited scheduled data releases leaving markets focused on the next policy catalyst.
Attention is on the Bank of Japan meeting on 18 September, where markets are fully pricing a 25 bp rate rise. In USD/JPY, Scotiabank points to scant additional support ahead of the 2026 low around 152, while framing 155 as the next resistance level after previously acting as support.
Yen Momentum and Market Positioning
We see the Japanese Yen building strong upward momentum against the US Dollar as we approach the Bank of Japan’s rate decision on September 18. With a 25-basis-point rate hike already fully priced in by the market, USD/JPY is drifting downward toward critical support at 153. If this level breaks, we expect a rapid test of the yearly low near 152.
Recent futures market data shows that speculative traders have been rapidly unwinding their short Yen positions, which is fueling this upward momentum. Historically, when net-short JPY contracts on the CFTC registry drop sharply, it triggers a powerful short squeeze that drives the Yen significantly higher. This shifting sentiment suggests that derivative traders should align with this trend rather than fighting it.
Trading Strategy and the Macroeconomic Backdrop
We recommend that derivative traders position for further Yen gains by purchasing USD/JPY put options or establishing short futures positions. Strong resistance is now established at 155, which previously acted as key support and now serves as an ideal level for placing defensive stop-loss orders. Traders should target the 152 level in the coming weeks, as a break below this point could open the door for much deeper declines.
This bullish outlook for the Yen is fundamentally supported by Japan’s core inflation remaining sticky above the 2% target, which justifies the central bank’s tightening cycle. At the same time, falling US Treasury yields are narrowing the interest rate gap between the two countries, making the Dollar less attractive. This macroeconomic backdrop creates a highly favorable environment for holding long Yen exposures.
