The US Dollar (USD) may hit 153.00 again before a noticeable drop is expected. Looking long-term, the USD should continue to gain strength, with a key target at 153.80. Recently, the USD has risen sharply, reaching 152.99 before a small decline, eventually closing at 152.68. This marks five days of gains in a row. Even though the USD seems overbought, it might make another attempt to reach 153.00 before any big corrections happen. Key support levels to watch are 152.00 and 151.50.

USD Outlook for the Next One to Three Weeks

At the start of this week, there was optimism for the USD. Even with the USD at 150.35, further strength is expected, focusing on the 153.80 level. This outlook is valid as long as the solid support is at 150.90, which was previously identified at 150.50. With the ongoing upward momentum, we believe the US dollar will likely test the 153.00 mark against the yen in the next one to three weeks. Traders might consider buying call options at a strike price of 153.00 or slightly higher, set to expire in late October or early November 2025. This strategy allows traders to take advantage of the expected rise while limiting their potential loss. This positive view on the dollar is bolstered by recent economic data showing differing central bank policies. The US core inflation rate for September 2025, released this week, remained high at 3.6%, putting pressure on the Federal Reserve to keep its strict policies in place. In contrast, the Bank of Japan shows no signs of shifting away from its very loose monetary policies, which continues to burden the yen.

Managing Volatility and Risks

However, we need to be careful since the currency pair is currently overbought, raising the chances of a sudden reversal. We remember the Japanese Ministry of Finance’s currency interventions in late 2024 when the rate crossed the 152.00 level. To reduce this risk, traders who have long positions should think about placing a stop-loss or buying protective put options near the support level of 150.90 mentioned earlier. The likelihood of testing new highs followed by a “sizeable pullback” indicates rising volatility. A long strangle strategy, which involves buying both an out-of-the-money call and an out-of-the-money put, could be a smart move. This strategy would benefit from significant price changes in either direction, whether it breaks above 153.80 or experiences a sharp drop due to intervention. Create your live VT Markets account and start trading now.

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