USD/JPY rose 0.4% to around 155.30 in late Asian trading on Tuesday as the US Dollar firmed. The move came as the Dollar recovered, even after US President Donald Trump warned of higher tariffs for countries that do not honour trade agreements. The US Dollar Index (DXY) was up 0.2% near 97.90, measuring the Dollar against six major currencies. On Monday, Trump warned of steeper tariffs for countries “playing games with existing trade agreements” following a Supreme Court ruling.

Dollar Strength And Yen Weakness

Last week, the Supreme Court ruled against tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Meanwhile, the Japanese Yen lagged. This was despite a Nikkei report that US authorities carried out January “rate checks” to support the Yen. Reuters also reported they were ready for joint intervention if Japan asked for it. On the chart, USD/JPY traded near 155.30 and remained broadly sideways. This fits with a Descending Triangle pattern. Support sits near 152.00, while resistance is around 156.01. The upper boundary is drawn from the 23 January high of 159.66. The 20-day EMA stands at 154.91, and price is still above it. The 14-day RSI remains between 40.00 and 60.00, suggesting a range-bound market. In 2025, USD/JPY tightened into a narrow range, with pressure building around 155. That period included heavy US political headlines and talk of possible Japanese currency intervention. Today, the pair trades much higher near 162.50, showing that broader Dollar strength ultimately prevailed.

Policy And Volatility Outlook

Markets are still being driven by central bank policy, though the story is shifting. January US CPI came in at 3.2%, hotter than expected. This keeps pressure on the Federal Reserve to hold rates steady. It also supports the Dollar through higher yields, which helped drive last year’s breakout. The Bank of Japan is also showing early signs of change. At its last meeting, it removed language that committed to further easing. That adds uncertainty, because any move toward tightening would be a major shift for the Yen. In early 2025, the focus was on possible joint intervention. Now, traders are watching for the BoJ to act on its own. With this backdrop, volatility is the key issue for derivatives traders in the weeks ahead. Implied volatility on 3-month USD/JPY options has moved back above 12%. This reflects concern about a sudden policy signal from Tokyo. Last year’s sideways consolidation eventually broke higher, and another sharp move remains possible. Higher volatility also makes outright option buying more expensive, so cost-aware strategies may be more attractive. Bullish traders who expect the US rate advantage to persist may consider call spreads to target a move toward 165, while limiting upfront premium. Traders positioning for a BoJ surprise may prefer put spreads to seek gains from a drop back toward 158. Create your live VT Markets account and start trading now.

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