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Published: 28 September 2026,06:39
Daily Market Analysis New
*The Japanese yen recovered as markets increased speculation over another BoJ rate hike in October.
*The BoJ recently raised its policy rate to 1.25%, the highest level in more than three decades.
*Former BoJ executive Kazuo Momma said the central bank could raise rates for a second straight month in October, earlier than many economists expect.
The Japanese yen rebounded as investors increased expectations that the Bank of Japan could raise interest rates again as early as its October policy meeting.
The BoJ recently lifted its benchmark rate to 1.25%, continuing a faster pace of policy normalisation after another increase in June. Governor Kazuo Ueda said the central bank had entered a new phase, shifting its focus from pushing underlying inflation toward 2% to preventing inflation from overshooting the target.
Expectations for another near-term hike were strengthened further by comments from Kazuo Momma, a former BoJ executive director responsible for monetary policy. Momma said the central bank could raise its benchmark rate for a second consecutive month in October, which would be earlier than many economists currently expect.
His comments are significant because the BoJ has recently accelerated its tightening cycle. Previous rate increases were generally spaced around six months apart, while the latest move came only three months after the June hike. A second consecutive increase in October would therefore signal a much more aggressive shift toward monetary-policy normalisation.
A faster tightening cycle would be fundamentally supportive for the Japanese yen. Higher domestic interest rates would narrow the yield differential between Japan and the United States and reduce the attractiveness of yen-funded carry trades.
However, the Federal Reserve’s own hawkish stance remains an important counterweight. US rates and Treasury yields remain elevated, meaning USD/JPY could stay volatile even if expectations for further BoJ tightening continue to increase. For now, the yen’s fundamental outlook has improved, with Momma’s October-hike call adding fresh support to expectations of a faster BoJ tightening cycle.
Technical Analysis
The USD/JPY pair has broken below its prevailing uptrend channel, marking a significant technical development and providing an early signal of a potential bearish shift in the pair’s price structure. The downside breakout suggests that the previous bullish trajectory is weakening, with selling pressure beginning to gain greater control.
The momentum indicators are also echoing the bearish bias. The RSI has moved out of the overbought zone and subsequently dipped below its midline, indicating that bullish momentum is losing strength. Meanwhile, the MACD has formed a death cross while remaining above the zero line, suggesting that upward momentum is diminishing and that a bearish momentum shift may be developing.
Should USD/JPY remain below the broken uptrend channel, the current bearish bias could strengthen and potentially lead to further downside movement. A sustained recovery back above the channel, however, would weaken the immediate bearish setup and suggest that the recent breakdown may require further confirmation.
Resistance Levels: 158.05, 160.60
Support Levels: 155.60, 153.00
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