The USD/JPY currency pair saw a bounce back on Friday, with the exchange rate climbing above 153.00. This move reversed a previous drop of 100 pips, or 0.68%. This recovery is linked to steady US 10-year Treasury yields and a growing demand for the US Dollar. Technical analysis indicates that buyers are gaining traction at the 153.00 level. Support is anticipated near the 20-day Simple Moving Average (SMA) at 152.52. If the rate dips below 152.80, targets for further decline could be 151.53.

Possible Resistance Levels

If the exchange rate climbs past 154.00, we expect resistance at the November 4 high of 154.48, then at 155.00. The Relative Strength Index (RSI) suggests bullish momentum will persist if the price surpasses these resistance levels. Over the week, the Japanese Yen strengthened against major currencies, including a 1.70% gain against the New Zealand Dollar and a 0.11% increase against the US Dollar. Other currency movements show a mix of strengths and weaknesses, as illustrated in the heat map percentage changes table. With USD/JPY rebounding above 153.00, this could signal a return to an upward trend. The strength of the pair closely correlates with the interest rate gap. With US 10-year Treasury yields steady at around 4.6%, the outlook for a stronger dollar against the yen remains strong. This stability suggests that buying on dips is still a smart approach. For bullish traders, purchasing call options with strike prices at 154.50 or the key 155.00 level could capture further upward movement. The RSI backs this view, indicating ongoing buyer control. Another strategy could be a bull call spread, which helps lower the initial cost of positioning for a potential rise.

Risk of Intervention

That said, we need to remain aware of the risk of intervention from Japanese authorities as the pair rises. We recall the sharp drops in spring 2024 when the Ministry of Finance intervened as rates neared the 160 level. This historical context makes holding long positions risky without some form of protection. To navigate this uncertainty, traders might consider straddles or strangles, which are designed to profit from significant price movements in either direction. Implied volatility for one-month USD/JPY options has already risen to over 11%, showing market jitters about a possible policy change or intervention. This strategy is structured to capitalize on a spike in volatility, not on any specific direction. On the other hand, if key support at the 20-day moving average of 152.52 fails, this could signal a deeper correction. In this case, buying put options with a strike near 151.50 could provide downside protection or a way to profit from a price reversal. This would serve as a hedge against an unexpected end to the bullish trend. The overall economic environment adds uncertainty, necessitating caution. Weak US consumer sentiment and poor data have led fed funds futures to predict a 25% chance of a Fed rate cut by the end of the first quarter of 2026. This potential long-term concern could limit the dollar’s rise, making short-term strategies more attractive than long-term investments. Create your live VT Markets account and start trading now.

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