The Governor of the Bank of Japan, Ueda, said there isn’t a clear way to raise interest rates. He downplayed risks related to inflation, impacting USD/JPY sellers. As a result, the currency pair rose to 149.70, aiming to break its 200-day moving average. Although the Bank of Japan has raised its inflation forecasts, Ueda didn’t clearly state if there would be rate hikes by the end of the year. The Bank has been cautious in the past, and previous rate hikes took a while to implement.

USD/JPY Chart Analysis

The current USD/JPY chart shows interesting developments. Buyers face hurdles needing to break the 200-day moving average at 149.51 and the 150.00 level to maintain a strong upward trend. Achieving this is crucial for a continued upward movement later this week. From the Bank of Japan’s latest press conference, it’s clear the Japanese Yen is likely to remain weak. Governor Ueda’s hesitance to commit to a rate hike, despite revised inflation forecasts, indicates that the interest rate gap between the US and Japan will stay wide. This situation creates opportunities for the USD/JPY exchange rate to rise in the coming weeks. Recent data from the United States supports this view. The latest US core inflation for June 2025 held steady at 3.6%, and the Federal Reserve kept its policy rate unchanged. This strengthens the dollar, making yen less attractive to hold. It fuels carry trades, where traders borrow yen to invest in higher-yielding dollars.

Cautious Monetary Policies

The Bank of Japan is known for moving cautiously, as seen in its long rate hike cycle. This slow approach is likely to continue, meaning any sudden yen strength is unlikely without government action. This supports the idea that USD/JPY is likely to trend upward for now. For derivative traders, this suggests they should buy call options on USD/JPY with strike prices near the psychological level of 150.00. Since the pair is currently above its 200-day moving average, a move towards this level seems likely. Implied volatility may increase as we near this zone, making options a smart choice for managing risk while capturing potential gains. However, be cautious as we approach the 151-152 yen level. Remember the interventions by the Ministry of Finance in late 2022 and throughout 2024 to strengthen the yen. Thus, while buying calls is a good strategy, traders could also consider bull call spreads to profit from a rise to that area while limiting risk if authorities intervene. Create your live VT Markets account and start trading now.

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