USD/JPY remains strong at around 155.20 during the early Asian session on Tuesday. The US Dollar is holding firm against the Japanese Yen as traders look forward to US economic data and consider possible adjustments to Federal Reserve rates.

Focus on US Economic Data

This week, the US September Nonfarm Payrolls report is a key focus. It is expected to provide insights into the health of the US economy. The delay in this data due to the recent US government shutdown could highlight challenges in the job market, potentially impacting investor decisions. Market sentiment currently shows lower expectations for a December rate cut by the Federal Reserve. The chances for a 25 basis points cut have dropped to below 40%, down from over 60%, according to the CME FedWatch tool. Despite showing strong growth, the Japanese Yen is still weak and close to a nine-month low. Prime Minister Sanae Takaichi has urged the Bank of Japan to keep supportive monetary policies, as officials are cautious about intervening to stop the Yen’s decline. Japanese financial authorities are closely watching currency changes, with Finance Minister Satsuki Katayama voicing concerns over movements in exchange rates. A weak Yen increases import costs, which could affect policy choices.

Strategies for USD/JPY Moves

With USD/JPY trading strong above 155.00, we should expect higher volatility soon. The upcoming US Nonfarm Payrolls report will give us our first real look at the US labor market after a mix of signals. This report will likely drive the US dollar’s performance in the short term. If the American job market shows weakness, the dollar’s recent strength could quickly reverse. Forecasts for the October 2025 jobs report expect a gain of only 150,000 jobs, a significant drop from previous months. A worse-than-expected number could push USD/JPY down towards 153.00 as traders bet on a Federal Reserve rate cut. At this moment, uncertainty is the main theme, which is reflected in Fed funds futures. The CME FedWatch tool shows just a 35% chance of a rate cut at the Fed’s December 2025 meeting. This indicates cautiousness about a slowdown, but it does not mean the Fed is ready to change its current policy. On the flip side, the possibility of intervention from Japanese authorities is very high at these levels. We remember the large-scale interventions in autumn 2022 when the pair went above 150. Recent warnings from officials suggest they are prepared to act again, creating a risk of a sudden, sharp drop in the currency pair. Given these mixed risks, using derivative strategies that profit from a significant move in either direction is sensible. Buying an options strangle, which involves a call and a put option at different strike prices, allows traders to benefit from a significant breakout. This could happen due to a weak US jobs report or direct actions from the Bank of Japan. For those wanting to stay bullish on the dollar, a cautious approach is recommended. Using call spreads can help define risk and lower the cost of betting on further gains. Pairing this with some inexpensive out-of-the-money put options can protect against the constant threat of a sudden intervention. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now