The US Dollar is currently holding steady against the Japanese Yen, around the 154.00 mark. This comes after a rise from 151.50, driven by a strong Federal Reserve stance, while the Bank of Japan’s interest rate moves have provided little help for the Yen.

USD/JPY Technical Analysis

The USD/JPY currency pair is forming a small triangle pattern, suggesting it may continue rising towards 154.30 to 154.85. Technical indicators present mixed signals: the RSI is above 50, yet the MACD hints at a possible pullback. If the trend turns bearish, USD/JPY may test support levels between 153.00 and 153.25. Today, the US Dollar gained strength against the Swiss Franc, increasing by 0.33%. Other notable changes include a 0.21% rise against the Yen and a slight 0.07% dip against the Canadian Dollar. The heat map below displays percentage changes among major currencies, showing the US Dollar’s varying performance against the Euro and Japanese Yen. FXStreet consistently provides financial insights for savvy trading, with a legal disclaimer highlighting the risks of market investments. We see the US Dollar stabilizing its gains against the Yen around 154.00. This pause follows a rally fueled by the Federal Reserve’s firm position on interest rates. The market is largely disregarding the Bank of Japan’s commitment to tightening, placing the Yen under pressure.

US and Japan Economic Comparison

The economic landscape favors a stronger Dollar, especially after last week’s US jobs report for October revealed an impressive 210,000 jobs added, surpassing expectations. With core inflation lingering near 3.4%, the Fed has no reason to shift its hawkish stance. Conversely, Japan’s core CPI is stuck around 2.1%, diminishing the chances of immediate action from the Bank of Japan. For derivative traders, this situation points to a potential upside breakout in USD/JPY. Strategies like buying call options near a strike price of 154.50 or using bull call spreads might be effective in the weeks ahead. The technical chart shows a continuation pattern, reinforcing the belief that the next significant move will be upward. We should aim for the February 13 high of 154.85 as the first target for these bullish trades. A clear break above this level could lead to a further rise toward the 155.30 extension target. Options market data supports this outlook, with one-month risk reversals showing a consistent premium for USD calls over JPY calls. The main risk to this view is potential intervention by Japanese authorities, which is a real concern as the pair approaches 154.00. Past actions to defend the currency led to sharp Yen rallies in 2022 and 2024. This makes holding long positions without a hedge risky. To protect against a sudden downturn, we should consider buying inexpensive out-of-the-money put options as insurance. A put option with a strike price around 152.50 could shield our portfolio from a sudden drop. This strategy lets us maintain a bullish outlook while managing potential losses if officials decide to intervene. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now