The USD/JPY exchange rate is set to keep going up, focusing on the level of 158.90, as per FX analysts at UOB Group. In the short term, strong USD momentum shows potential for further gains, but current overbought conditions make reaching 158.90 unlikely today. If there’s a pullback, it should remain above 157.40, with minor support at 157.75. Although momentum is slowing, the USD may rise within a range of 157.60 to 158.40, not likely exceeding 158.35. For the next 1-3 weeks, the USD has risen significantly, and we should keep an eye on the key level of 158.90. The market sentiment remains positive as long as the USD stays above 157.00, which is considered strong support. These insights are from the FXStreet Insights Team, made up of journalists who provide market coverage and analysis from various experts.

Historical Perspective

One year ago, in January 2025, analysts indicated the dollar was likely to continue rising against the yen, focusing on the 158.90 level—previously a high. This prediction was accurate, as the pair eventually moved well past that level during the year. The main reason for the dollar’s strength remains unchanged. It is driven by the large difference in interest rates between the U.S. and Japan. Recent U.S. jobs data for December 2025 showed a strong increase of over 215,000 jobs, supporting the Federal Reserve’s decision to maintain rates at 5.0%. In contrast, Japan has just raised its main rate to 0.0%, ending years of negative rates. With USD/JPY currently trading around 161.75, last year’s upward momentum looks set to continue. The significant policy difference supports the dollar, attracting more yield-seeking investors. Therefore, it appears likely that USD/JPY will trend upward in the coming weeks.

Trade Strategy

For traders, this outlook suggests buying call options for potential profit as the dollar may keep rising. A potential strategy could involve purchasing calls with strike prices of 163.00 and 164.00, expiring in late February or early March. This would allow traders to benefit if the dollar strengthens as predicted. However, there is a need for caution. Sudden policy changes or market interventions by Japanese authorities, as seen when the currency crossed the 160 level in 2024, may pose risks. To mitigate this, it’s smart to protect long positions by buying out-of-the-money put options. A key support level to monitor is 159.50, and having protective puts below this level could safeguard against sudden reversals. Create your live VT Markets account and start trading now.

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