The USDJPY exchange rate has stabilized after a period of decline, with support levels that buyers are now protecting. The most important support is the rising 100-bar moving average on the 4-hour chart, currently at 146.389. Below this, there’s a swing area from late April between 145.92 and 146.288, which offers more support. This setup creates a clear risk area for traders. Right now, the price is around 146.52, indicating renewed buying interest and a slowdown in the downward trend. However, the market needs to stay alert for possible changes as conditions shift.

Resistance Levels

Above, the 38.2% retracement level from July, now at 146.704, serves as resistance. Sellers previously pushed below this level but need to continue defending it to keep a bearish outlook. If they fail to stay below 146.704, it could weaken bearish momentum in the short term. For sellers, regaining control might require pushing the price below the 100-bar moving average and 146.288, which would shift focus to the 50% midpoint and the lower swing area around 145.92. While selling pressure has decreased, it could still resurface as a concern. We view the support zone between 145.92 and 146.389 as a crucial battleground in the coming weeks. Recent US inflation data shows the Consumer Price Index held steady at 3.7% in August, supporting dollar strength. This contrasts with Japan’s top currency diplomat, Masato Kanda, who has warned that authorities are closely monitoring currency movements.

Trading Strategies

For traders optimistic about the support holding, selling put options could be a good strategy. This involves collecting a premium by betting that the price won’t drop below a specific level by a set date. Setting a strike price for these puts just below the 145.92 swing area offers some protection against minor dips while benefiting from time decay if prices remain stable. On the other hand, if you think sellers will take control, buying put options could allow you to profit from a downward trend. Intervention is a possibility, as seen in late 2022 when authorities caused a quick 500-pip drop. A break below 146.00 could lead to a similar sharp decline, making long puts a smart option to capitalize on this potential move. Given the conflicting policies between a hawkish Federal Reserve and a vigilant Bank of Japan, we may see an increase in volatility. A long straddle, which involves buying both a call and a put option at the current price, could benefit from significant price movements in either direction. This approach is ideal when expecting a decisive breakout, but uncertain about the direction. Create your live VT Markets account and start trading now.

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