The USD/JPY pair dropped over 2%, falling from approximately 150.91 to 147.28. This was largely due to disappointing US employment data, which increased demand for safe-haven assets. Currently, the pair is trading close to its weekly low at 147.38, marking a weekly loss of 0.18%. The move below the 200-day Simple Moving Average (SMA) at 149.49 allowed for further declines, pushing the pair to test previous lows. The current momentum looks somewhat bearish, indicated by the Relative Strength Index (RSI), which suggests possible further drops. If the pair goes below the 147.00 level, the next support will be at 145.85, which is from July 24. After that, support lies between the 100 and 50-day SMAs at 145.71. If the downward trend continues, the next target becomes the 144.00 level. The Japanese Yen, a leading global currency, responds to multiple factors, including Japan’s economic performance, Bank of Japan (BoJ) policies, and differences in US and Japanese bond yields. The JPY is often viewed as a safe haven and tends to gain strength during times of financial uncertainty, attracting investors looking for stability. We’re witnessing a significant change in the USD/JPY pair after a weak US jobs report released on August 1, 2025. The report showed a job increase of only 95,000, while the expectation was 180,000. This has led to speculation that the Federal Reserve might pause its tightening cycle, immediately boosting the Yen as a safe haven. Given the break below the 200-day moving average, derivative traders might consider strategies that profit from further declines. Buying put options with strike prices below the current 147.38 level seems appealing for the upcoming weeks. These options would gain value if the pair tests crucial support around 145.85. The outlook is further bolstered by the shrinking interest rate difference between the US and Japan. While US 10-year Treasury yields have decreased to 3.8% due to the weak data, the BoJ has hinted at a possible shift away from its ultra-relaxed policy later this year. This divergence in policies strongly supports a lower USD/JPY. We’ve seen a similar pattern before, particularly during the sharp decline in late 2023. Back then, speculation about a Fed policy change and a BoJ shift caused the pair to fall from above 151 to nearly 140. The current situation mirrors that period, suggesting a similar downward trend could occur. For those preferring a lower-risk strategy, selling out-of-the-money call spreads could be an effective approach. This strategy involves selling a call option and buying another at a higher strike price to limit potential losses if the pair unexpectedly reverses. This method allows us to earn premium while betting that the pair will not rise significantly above current levels.

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