**USD/JPY Technical Analysis** The USD/JPY pair is on an upward trend, moving beyond the 148.00 level and approaching 152.00. It has surpassed both the 50-day and 200-day moving averages. Although there was a recent dip, it seems temporary, with strong support around 151.00. We could see further gains toward 153.00. The value of the Japanese Yen is affected by the performance of Japan’s economy, the policies of the Bank of Japan, bond yield differences, and global risk sentiment. Changes in the Bank of Japan’s policies since 2013 have contributed to the Yen’s decline against major currencies. Investors often consider the Japanese Yen a safe haven, which can increase its value during times of market stress. During instability, demand for the Yen typically rises due to its perceived reliability. **USD/JPY Signals and Strategies** The USD/JPY pair is showing strength in the short term, having bounced back above 152.00. Last week, the pair broke above the 200-day moving average, confirming an ongoing bullish trend. Traders are closely monitoring whether it can maintain support above the 151.00 level for a potential move towards 153.00. However, this upward trend is challenged by the Federal Reserve’s anticipated policy direction. Current market pricing indicated by Fed funds futures suggests an 85% chance of a quarter-point interest rate cut in November 2025. This expectation of lower US rates is creating a cap on how high the US dollar can rise. At the same time, the Bank of Japan’s gradual policy normalization, starting in 2024, supports the Yen. The difference in yields between US and Japanese bonds is shrinking, with the 10-year spread tightening by about 100 basis points over the past year. This shift makes holding Yen more appealing. Adding to the unpredictability, the US government shutdown is delaying key economic data releases, including this week’s Producer Price Index. This situation forces traders to rely on headlines and market sentiment, especially with rising US-China trade tensions. In this climate, the Yen’s status as a safe haven may lead to a rapid shift in response to any negative news. For options traders, the clash between bullish technical signals and bearish economic fundamentals suggests buying volatility. One-month implied volatility for USD/JPY is around 9.5%, making strategies like long straddles or strangles effective for positioning ahead of a significant price move. These strategies allow traders to profit from large movements in either direction without needing to predict the timing precisely. For those who believe the Yen will strengthen, a put spread could be a cost-effective strategy. Buying a put option at the 151.00 strike and selling one at a lower strike, such as 149.00, creates a defined-risk position. This strategy would profit if the pair declines from its current highs due to rising market stress. Create your live VT Markets account and start trading now.

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