The USD/JPY pair has dropped to about 158.35 due to discussions about potential Japanese intervention. Japan’s Finance Minister stated that all options, including currency intervention, are on the table to address the Yen’s decline. The Federal Reserve is expected to keep interest rates unchanged this month, which will impact currency trends. The US Dollar is generally strong but has slightly decreased ahead of the long weekend in the US.

Technical Analysis

Currently, the USD/JPY is stabilizing around 158.00. Over the last two months, it has fluctuated between 154.40 and 157.90. The 20-day EMA at 157.33 supports an ongoing uptrend, while the RSI at 62 indicates continued momentum. If prices stay above the 20-day EMA, the upward trend may persist, with support likely during any pullbacks. The US Dollar is the official currency of the United States and makes up over 88% of global foreign exchange transactions, averaging $6.6 trillion per day in 2022. Federal Reserve actions, like changing monetary policy or using unconventional measures such as quantitative easing or tightening, can significantly impact the USD’s value by affecting credit in the economy. These decisions are aimed at managing inflation and boosting employment, which in turn affects the USD’s status worldwide. The USD/JPY is trading close to 158.35, raising concerns about potential intervention from Japanese authorities. Officials have made it clear that they are prepared to tackle excessive moves against the yen. This situation is reminiscent of 2024 when authorities spent over 9 trillion yen to defend the currency around the 155-160 range, making current warnings seem credible. At the same time, the Federal Reserve is largely expected to keep interest rates steady during this month’s meeting. Data from late 2025 indicated core inflation remained persistent at 2.7%, and the labor market added a solid 195,000 jobs in December, leaving the Fed little reason to consider lowering rates. This difference in policy between the US and Japan is the main factor keeping the dollar strong.

Risk Management Strategies

From a technical viewpoint, the upward trend remains valid as long as the price stays above the important support level of 157.33, which is the 20-day moving average and the breakout point from previous consolidation. A daily close below this level would indicate that a deeper correction could be on the way. For derivative traders, the tension between a stable trend and the risk of a sudden reversal creates a high-volatility environment. This suggests that options pricing will reflect this uncertainty, making strategies that benefit from significant price swings appealing. Traders might consider buying straddles or strangles to take advantage of any major moves, regardless of direction. Those holding long positions in USD/JPY futures should think about buying put options to protect against a sudden drop due to intervention. These puts can act as insurance, safeguarding profits or limiting losses if Japanese officials act on their warnings. This approach is a wise way to manage the evident downside risk in the coming weeks. Create your live VT Markets account and start trading now.

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