The US Dollar has risen sharply against the Japanese Yen, hitting daily highs above 155.50 in a calm trading session. The Yen is struggling and is weaker compared to other major currencies. Traders are closely watching the Federal Reserve and the Bank of Japan for their monetary policy decisions, which will likely impact market trends. The Fed is expected to lower interest rates soon due to high inflation in the US. On the other hand, the Bank of Japan is hinting at a possible rate hike, though their next steps remain uncertain.

Bullish Momentum Supports The US Dollar

The US Dollar is gaining strength as it climbs above the top of a downward channel. Technical indicators, like the RSI above 50 and a positive MACD, indicate increasing strength. If the Dollar consistently closes over 155.50, it could rise toward 156.15 and possibly reach 156.60. However, if it falls below 155.50, the price could drop to 154.35 or the channel’s bottom at 154.00. At the same time, the Japanese Yen shows mixed results against major currencies and has strengthened most notably against the Swiss Franc. The accompanying table lists these changes for deeper analysis. Currently, the US Dollar is making strides against the Yen, hitting the crucial resistance level of 155.50 as of December 8, 2025. This movement is largely due to the growing policy gap between the US Federal Reserve and the Bank of Japan. Traders in derivatives should pay close attention to this trend as important meetings unfold this week.

Market Expects The Federal Reserve To Cut Rates

The market anticipates a rate cut from the Federal Reserve on Wednesday. However, recent data reveals that US inflation remains high, with the latest CPI figure for November 2025 at 3.5%. This persistent inflation suggests that the Fed may indicate a slow approach to future cuts, which should support the dollar. This “hawkish cut” mindset is favorable for the USD/JPY pair. In contrast, the Bank of Japan is signaling a potential rate hike, a decision the market has predicted since ending negative rates in early 2024. With Japan’s core inflation near 2.8%, there is increasing pressure on the BoJ to tighten policy. Nonetheless, their cautious approach has made the Yen the weakest among major currencies. Traders who believe in the Dollar’s continuing momentum might consider purchasing call options with strike prices above 155.50 to capitalize on a breakout. A sustained increase could aim for earlier resistance levels at 156.15 and then 156.60. Using bull call spreads could also be a cost-effective way to capture this potential rise. It’s important to recall that levels above 155 have previously triggered interventions from Japanese officials in 2023 and 2024. This makes holding long positions risky, and traders should think about buying put options as a safeguard against a sudden price drop. A decline below the 155.00 trendline could indicate that the bullish momentum has faltered. With both the Fed and BoJ making decisions this week, implied volatility for USD/JPY options has significantly increased. This rise makes options more expensive, leading traders to consider strategies that benefit from a potential drop in volatility after the announcements. Waiting for the situation to stabilize before entering new positions might also be a smart move for better pricing. Create your live VT Markets account and start trading now.

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