1-3 Week Outlook
In the 1-3 week outlook, recent trading has pushed the USD above 155.00, previously ranging from 153.10 to 155.00. While there is an upward trend, a lack of strong momentum may limit gains around 155.55. If the USD drops below 153.95, this could indicate a weakening trend.
The FXStreet Insights Team collects market observations from respected experts to provide additional analyses. Markets change rapidly, and the newsletter aims to deliver accurate information for readers. This information is for informational purposes only, so readers should conduct their own research before making financial decisions.
We expect the USD/JPY pair to maintain an upward trend and may reach the 155.20 level in the coming weeks. This outlook is supported by the clear differences in central bank policies. Recent US inflation data from October 2025 was 3.1%, suggesting that the Federal Reserve is unlikely to cut rates soon.
In contrast, the Bank of Japan has a much more accommodative policy, with its key interest rate at only 0.1%. The significant interest rate gap between the Fed’s 5.25% and the BoJ’s 0.1% continues to support the US dollar. The appeal of the carry trade, where traders profit from this rate difference, also strengthens this pair.
Strategic Considerations
Since gains may be limited near 155.55, a bull call spread might be a smart strategy. This strategy involves buying a call option with a strike price around 154.50 and selling a call option with a higher strike price, like 155.50. This approach limits our risk while allowing for profits from a moderate rise, fitting with the current outlook.
However, we should be aware of potential intervention from Japanese authorities. They intervened in the market in late 2022 and again in 2024 when the rate exceeded 151-152, so any movement toward 155 will be closely watched. Any sudden official statements or actions to strengthen the yen could quickly change our position.
Keep an eye on the critical support level at 153.95. A clear drop below this price would indicate that the current upward trend has stalled. If that occurs, it would be a sign to exit bullish derivative positions and reassess the market direction.
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