USD/JPY Range-Trading Phase

The USD/JPY pair could drop to 151.20, but it’s unlikely to go much lower. Analysts believe we are currently in a range-trading phase between 149.50 and 153.00. In the past 24 hours, the USD traded between 151.58 and 152.61, closing at 151.83, a decrease of 0.29%. Today, the USD might slightly lower to test 151.20, though we don’t expect a significant drop. Key resistance levels are at 152.00 and 152.40. Over the next 1-3 weeks, analysts still think USD/JPY will stay within the 149.50 to 153.00 range. More attention is on the USD due to trade tensions, bets on Fed easing, and US fiscal struggles. Market observations show the rise of GBP/USD and AUD/USD, driven by changes in US monetary policy and inflation risks highlighted by the RBA. Gold prices are stable below record highs amid US-China trade tensions. Bitcoin’s recovery is limited by ongoing trade disputes and government shutdown issues.

Market Strategy Adjustments

Since USD/JPY seems to be entering a range-trading phase, we should rethink our strategies instead of looking for strong trends. The immediate focus should be on testing the 151.20 support level, influenced by a weaker US dollar. In this environment, buying short-dated put options might help us take advantage of the mild downward trend. The reasons for a weaker dollar are becoming clearer. Recent US data shows Q3 GDP growth was revised down to only 0.8%, while the latest core PCE inflation figure is now at 2.7%. In comparison, Japan’s core inflation has stayed above the Bank of Japan’s 2% target for over 18 months, increasing pressure on the BoJ to signal policy changes. This divergence in policy suggests that the dollar’s strength against the yen may have peaked. In the coming weeks, buying volatility looks appealing with the expected range of 149.50 to 153.00. We can consider strategies like selling strangles or setting up iron condors with strikes just outside this range. Implied volatility for one-month USD/JPY options has dropped to about 8.5%, down from over 12% during earlier market interventions in 2024, making these trades potentially profitable due to time decay. Looking at the broader market, ongoing fiscal gridlock in Washington and trade tensions with China are putting pressure on the dollar. Meanwhile, gold prices remain high near $4,200 per ounce, a level not seen since late 2024 market turmoil, indicating a flight to safety. Therefore, any long USD positions should be hedged, as sentiment can shift quickly and push USD/JPY toward the lower end of its new range around 149.50. Create your live VT Markets account and start trading now.

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