The USD is strengthening against the JPY, while it has mostly stayed the same compared to the EUR and GBP. Traders are focusing on the risks and opportunities in these major currency pairs. They want to identify potential targets and understand what traders are paying attention to and why.

USD vs. JPY Analysis

The dollar is gaining against the yen due to contrasting policies from the Federal Reserve and the Bank of Japan. The US added 210,000 jobs in the July 2025 report, boosting expectations that the Fed will keep rates at 4.75% this fall. In Japan, inflation remains low at just 1.8%, leading the Bank of Japan to maintain its stance. This signals derivative traders to favor a long position on the US dollar against the yen. They can do this by buying USD/JPY call options, targeting the 158.00 level in the next few weeks. The main risk comes from a sudden change in Japanese officials’ tone. However, for now, the trend is upward. Currently, there’s a market dynamic similar to the strong trends of 2022 and 2023 when interest rate differences took the pair to historic heights. During that time, comments from the Ministry of Finance only caused temporary dips, providing better opportunities for long positions. Traders should stay alert for similar comments that could create chances to increase their bullish positions.

EUR and GBP Analysis

For the euro and the pound, the lack of movement indicates a pause as traders look for clearer signals. The latest flash PMI data from the Eurozone shows mixed results: a drop in manufacturing but stability in services, creating uncertainty for the European Central Bank. Meanwhile, the Bank of England also kept rates steady, noting inflation is persistent but slowing. This has limited the pound’s potential. In this sideways movement for EUR/USD and GBP/USD, derivative traders will likely turn to strategies that profit from low volatility. One common approach is selling out-of-the-money strangles, which means selling both a call and a put option to collect premium while the pairs stay within a range. The main risk here is an unexpected data release that could trigger a breakout from these established ranges. In summary, market direction is largely driven by differences in central bank policies and economic momentum. The dollar has a clear path against the yen, while the euro and pound are caught in a struggle. Traders should prepare for these trends to continue in the near future. Create your live VT Markets account and start trading now.

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