USD/JPY ended the week lower, down more than 0.74%, even as it held firm on a daily basis in a risk-off tone. The pair was trading at 156.85, where a hammer candle pattern formed, pointing to rebound risk near 156.00.
Technically, price remains boxed into a 156.00–159.00 range, a 300-pip band that has contained both buyers and sellers. Momentum has tilted bearish, with the 14-day RSI slipping below the 50 neutral mark. Initial support sits at 156.50, then the 23 October daily low at 156.08, ahead of 155.00 and, if that breaks, the 8 September swing low at 152.89. On the topside, resistance is seen at the 50-day SMA of 157.57, then the 100-day SMA at 158.50 and the 200-day SMA at 159.35.
Trading Strategy and Technical Signals
We advise derivative traders to prepare for continued range-bound conditions between 156.00 and 159.00 in the coming weeks. The daily hammer pattern near the 156.00 level signals a potential temporary rebound, making short-term call options or long derivative setups attractive for tactical bounces. However, with the pair struggling below key moving averages, we should treat rallies as potential selling opportunities rather than long-term trend reversals.
Because the 14-day Relative Strength Index has slid below the neutral 50 mark, we see overall momentum shifting in favor of sellers. A decisive break below the October 23 low of 156.08 could trigger accelerated downside pressure toward the 155.00 psychological level. In that scenario, we recommend positioning for breakouts using put option strategies aimed toward the September low of 152.89.
Risk Management and Macro Factors
To manage risk effectively, we must monitor upside resistance levels starting at the 50-day moving average near 157.57. Stronger resistance lies further up at the 100-day moving average around 158.50 and the 200-day moving average at 159.35. Placing defined risk stops or structure caps near these technical barriers will protect portfolios against unexpected upside spikes.
Macroeconomic factors also support a cautious approach, given Japan’s historical intervention efforts such as the ¥9.8 trillion spent in 2024 to curb excessive currency weakness near 160.00. Additionally, Japanese core inflation tracking near the Bank of Japan’s 2% benchmark continues to keep domestic interest rate hike expectations alive. We suggest keeping position sizes balanced while trading derivative contracts within this technical range over the next few weeks.
