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24 September 2025,07:21

Daily Market Analysis

Yen Eyes Reprieve as BoJ Rate Hike Bets Build, CPI in Focus

24 September 2025, 07:21

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Key Takeaways:

*Despite BoJ’s cautious stance, a recent U.S.-Japan trade deal and improving conditions are fueling bets on a potential October rate hike.

*Base pay rose 3% year-on-year, the strongest in decades, with real wages turning positive for the first time in over two years, strengthening the case for tighter policy.

*Focus turns to today’s National Core CPI and Friday’s Tokyo CPI, with upside surprises likely to boost BoJ tightening expectations and support the yen.

Market Summary:

The Japanese yen is stabilizing after a period of sustained pressure, as markets increasingly price in the possibility of a Bank of Japan rate hike in October. While the central bank has maintained a cautious stance amid global trade uncertainties and regional geopolitical risks, recent developments—including a bilateral trade agreement with the U.S.—have reduced external headwinds, allowing focus to return to domestic inflationary trends.

Supporting the case for policy normalization, Japan’s spring wage negotiations resulted in a 3% year-on-year increase in base pay—the highest in decades—while real wages turned positive for the first time in over two years. These developments have strengthened expectations that the BoJ may proceed with another rate increase as early as next month.

Market attention is now firmly on Japanese inflation data, particularly Friday’s Tokyo CPI release, which serves as a leading indicator for national price trends. While today’s regional or preliminary CPI readings may draw interest, a firm print in Tokyo exceeding consensus forecasts would likely solidify hawkish BoJ expectations and provide the yen with sustained momentum.

A conclusive breakout above key technical resistance levels would signal a reversal of the yen’s recent bearish trend, especially if supported by a shift in BoJ communication toward earlier policy normalization. Should the data fall short, however, the yen may remain confined to its recent ranges until clearer signals emerge from the central bank.

Technical Analysis 

EURJPY, H4

The EUR/JPY pair is testing significant resistance near the July 2024 peak, following a recovery from a minor technical retracement. The ability to regain upward momentum and challenge previous highs suggests underlying bullish strength remains firm, with a breakout likely opening the path toward multi-year highs.

The pair’s constructive technical structure is supported by momentum indicators. The Relative Strength Index is advancing toward overbought territory, reflecting sustained buying pressure, while the Moving Average Convergence Divergence continues to trend above its zero line, confirming that bullish momentum remains well-supported.

A clear break above the July resistance level would signal a resumption of the broader uptrend, with the next key technical target seen near the 176.00 handle. Conversely, a rejection at current levels could lead to a period of consolidation before the next directional move.

Resistance Levels: 175.40, 177.80

Support Levels: 173.45, 171.50

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