The Japanese Yen firms on a BoJ speech about AI and gives it all back

Bank of Japan (BoJ) Governor Ueda speaks on Tuesday at 06:35 GMT, and his first major remarks since the September 18 hike to 1.25% are the next test of October hike bets. Traders give a second hike on October 30 about a one-in-four chance. USD/JPY has crossed 158.00 in both directions in each of the last three sessions and trades just under it.

BoJ Deputy Governor Uchida said on Monday that artificial intelligence (AI) is a large positive demand shock pushing up activity and prices. USD/JPY dipped toward 157.50 around the remarks and was back above 158.00 well before the US data. He also said AI has made financial conditions more accommodative on balance, less than three weeks after the BoJ raised rates to tighten them.

A hike every three months points to December, not October

The BoJ raised its rate in June and again in September, and traders read the three-month gap as its pace. Governor Ueda said after the September hike that the BoJ's focus has moved from lifting inflation toward 2% to stopping it from overshooting. Stopping an overshoot before it happens would mean hiking in October, not waiting for December.

Wage growth is forecast to slow by a fifth in a month

Japan's August labour cash earnings are due on Tuesday at 23:30 GMT, forecast to rise 3.7% YoY after 4.7% in July. A slowdown that size would make an October hike harder to argue for. Governor Ueda speaks before the figures are out, so whatever he says about October comes without them.

The Fed's September minutes follow on Wednesday at 18:00 GMT. The Fed decides on October 28, two days before the BoJ, so the US half of the rate gap gets the first move.

The Yen's range into Governor Ueda

Resistance: The last three sessions have all peaked short of 158.50, the level the October 1 rally stopped under. 159.00, the September 24 high, is the next cap.

Support: Monday's low, just under 157.50, is the highest of the last four sessions. Friday's low, just under 157.00, marks where the payrolls dip ended.

Bias: Buyers keep the edge while 157.50 holds on a closing basis, aiming at 158.50 and then 159.00. The daily Stochastic Relative Strength Index (Stoch RSI) is near 84 and flattening above 80, so a firm-sounding Governor Ueda could pull the pair back to 157.50 without breaking the call. A daily close below 157.00 ends it.

USD/JPY daily chart