The US Dollar (USD) continues to rise against the Japanese Yen (JPY), possibly breaking above 160.00. In the last 24 hours, USD moved within a tight range of 158.18 to 158.87 and closed slightly higher at 158.64. This movement indicates that the market is consolidating, and we can expect a range of 158.25 to 159.00. Looking ahead to the next 1-3 weeks, analysts have a positive outlook for the USD. Currently at 159.15, it’s noted that even though the USD is overbought, there is still potential to surpass the 160.00 resistance level. After hitting 159.45, the upward momentum seems to be slowing down. If the USD consolidates in the short term, a drop below the 157.70 support level would suggest that reaching 160.00 is unlikely.

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The FXStreet Insights Team shares market observations from experts and adds more analysis. This information should not be viewed as investment advice and comes with risks. Readers are encouraged to do their own research before making investment decisions. It’s essential to remember that FXStreet and its authors are not registered investment advisors. We see the potential for the USD to continue its rally against the yen, aiming for a break above 160.00 in the coming weeks. This outlook is supported by the latest US Non-Farm Payrolls report from early January, which showed a strong addition of 210,000 jobs, surpassing expectations. This data highlights the resilience of the US economy and reduces the likelihood of Federal Reserve rate cuts. On the flip side, the yen is under pressure due to the Bank of Japan’s ongoing supportive policies. Japan’s recent core CPI figures, released last week, were a modest 1.9%, missing forecasts and falling below the central bank’s target. This situation further emphasizes the significant interest rate gap that favors the dollar. For derivatives traders, this outlook suggests looking at call options for further upside. Buying at-the-money or slightly out-of-the-money calls with expiration dates in late February or March can allow traders to benefit from movements towards 160.00 while limiting potential losses. With implied volatility for USD/JPY hovering around 9.5%, options are a practical way to express this view.

Potential Intervention From Japanese Authorities

However, the 160.00 level is a key psychological barrier, and we should be cautious about possible intervention from Japanese authorities. We remember that the Ministry of Finance intervened to support the yen with over ¥9 trillion last spring and summer when rates surpassed similar levels. This historical context makes selling out-of-the-money call options to finance long calls—creating a call spread—an appealing strategy to lower premium costs and clarify profit zones. While the upward trend appears strong, the 157.70 support zone is crucial. A significant drop below this level would indicate that the current upward momentum has failed, undermining the bullish outlook for the near future. This level should be a critical point for evaluating long positions. Create your live VT Markets account and start trading now.

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