The USDJPY has dropped sharply, falling below the 100-hour moving average at 147.775 and the 200-hour moving average at 147.57. This decline has shifted the market from a bullish to a bearish trend, giving sellers control. This drop has taken the pair into a swing area that has prevented further losses since early August. On August 14, this level was briefly broken, but buyers returned on August 15, pushing the pair higher.

Support Zone Observations

Right now, the price is hovering near this support zone. If it falls below this level, we could see a move towards the August low at 146.206, which would strengthen the bearish sentiment. However, if buyers can maintain this support, the pair might rise towards 147.07, and if it surpasses that level, we could see more upward movement. The USDJPY is at a key support level after a sharp drop breaking important moving averages. This level has held strong throughout August 2025, so we are watching to see if buyers will defend it again. If they fail, it would indicate a significant bearish trend and lead to lower prices. For those believing the support will hold, the crowded short positions in yen trading present an opportunity. Recent CFTC data showed non-commercial traders are net short by over 85,000 contracts, making a rebound more likely and vulnerable to a short squeeze. A good strategy could be to buy weekly call options with a strike price around 147.00 for a quick bounce with limited risk.

Market Dynamics and Strategies

If the support breaks, sellers will gain momentum, likely pushing the price toward the August low at 146.206. Since one-month implied volatility has risen to 9.5%, buying put spreads could be an affordable way to target that level. This strategy would benefit from a continued decline while limiting the cost of the options. However, we must consider this technical setup against a strong dollar environment. The US Consumer Price Index (CPI) for July 2025 was slightly higher than expected at 3.4%, and the Federal Reserve has indicated it is not ready to change its course, which could help prevent a significant decline in USDJPY. This fundamental pressure makes a lasting breakdown less likely. Additionally, we recall the Ministry of Finance’s market interventions in late 2024, when the USDJPY was trading at much higher levels. While we are currently far below those levels, recent comments from the Bank of Japan suggesting a slower pace of policy tightening add further complexity. This implies that any strength in the yen may be short-lived, making long-term bearish positions risky. Create your live VT Markets account and start trading now.

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