Current Analysis and Market Behavior

The US Dollar (USD) may reach the 154.50 mark against the Japanese Yen (JPY) before pulling back. Analysts at UOB Group believe that the upward trend might drive the USD toward a target of 154.90. In the last 24 hours, the USD unexpectedly surged to 154.44, breaking the expected range-trading pattern. Although this rise was quick, testing the 154.50 level before a possible drop seems likely. To keep this momentum going, the USD needs to stay above 153.30, with some support at 153.60. Over the next 1-3 weeks, USD’s outlook has changed from a mixed prediction of 151.00 to 153.30. The rapid increase to 154.44 suggests potential gains toward 154.90. However, if it drops below 152.50, it may signal a loss of upward momentum. Given the strong upward movement, there’s a chance that USD/JPY will test the 154.50 level. Traders could think about short-dated call options to take advantage of this push. The key is to see if the pair can hold above the support level of 153.30. It’s important to be cautious at these levels since there is a real risk of intervention from Japanese authorities. We remember the sudden yen buying in late 2022 when the dollar was strong, and recent warnings from the Ministry of Finance indicate they are closely monitoring the situation. Thus, maintaining long positions could be risky, as any reversal may be quick and significant.

Trading Strategy and Considerations

For traders expecting an upward move, buying call options with a strike price near 154.50 provides a way to participate with defined risk. Implied volatility is likely high, so consider using call spreads to minimize entry costs. The goal is to take advantage of a quick move to 154.90 before any pullback. Alternatively, this is a good time to buy put options as a hedge or to speculate on a policy response. A drop below the important support level of 152.50 would indicate that upward pressure has weakened, possibly leading to a larger decline. These puts can offer protection against a sudden market reversal. The fundamentals support a strong dollar, especially with the latest US inflation data showing a solid 3.5% for September 2025, keeping the Federal Reserve alert. This is in stark contrast to Japan, where rates are near zero, despite core inflation being at 2.8%. This significant interest rate difference largely drives yen weakness. In conclusion, a balanced strategy involves managing both the upward momentum and the substantial downside risk. We suggest positioning for one last upward move while also holding protective puts. This approach allows for potential gains while being prepared for a likely sharp correction in the coming weeks. Create your live VT Markets account and start trading now.

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