USD/JPY rose 0.4% to about 155.30 in late Asian trade on Tuesday as the US Dollar strengthened. The move came as the Dollar recovered even after US President Donald Trump warned of higher tariffs for countries that do not honour trade agreements.
The US Dollar Index (DXY) was up 0.2% at about 97.90, measuring the Dollar against six major currencies. On Monday, Trump warned of steeper tariffs for countries “playing games with existing trade agreements” after a Supreme Court verdict.
Dollar Strength And Yen Weakness
Last week, the Supreme Court ruled against tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Separately, the Japanese Yen underperformed despite a Nikkei report that US authorities initiated January “rate checks” to support the Yen, with Reuters saying they were ready for joint intervention if Japan requested it.
Technically, USD/JPY traded near 155.30, with a sideways outlook linked to a Descending Triangle. Support is near 152.00, while resistance is around 156.01, with the upper boundary drawn from the 23 January high of 159.66.
The 20-day EMA is at 154.91 and the price remains above it. The 14-day RSI stays between 40.00 and 60.00, pointing to a range-bound trend.
Looking back at the situation in 2025, we saw the USD/JPY pair coiling in a tight range, with significant tension building around the 155 level. That period was marked by political noise from the US and hints of currency intervention from Japan. Today, the pair trades significantly higher near 162.50, showing that the dollar’s strength ultimately won out.
Policy And Volatility Outlook
The environment today remains driven by central bank policy, although the narrative is shifting slightly. January’s US CPI print came in at 3.2%, which was hotter than expected and keeps pressure on the Federal Reserve to hold rates firm. This data point reinforces the dollar’s yield advantage, which was a key driver of the breakout we saw last year.
Meanwhile, the Bank of Japan is showing early signs of a policy pivot, having removed language committing to further easing in its last meeting. This has introduced significant uncertainty, as any move toward tightening would be a historic shift for the yen. We remember the talk of joint intervention in early 2025, but now the market is focused on the BoJ acting on its own.
Given this backdrop, volatility is the main concern for derivative traders in the coming weeks. Implied volatility on 3-month USD/JPY options has climbed back above 12%, reflecting the market’s nervousness about a sudden policy announcement from Tokyo. The sideways consolidation noted in last year’s technical analysis ultimately broke to the upside, and we must be prepared for another sharp move.
This elevated volatility makes buying outright options expensive, so traders should consider strategies that manage costs. Bullish traders, who believe the US rate advantage will persist, could look at call spreads to target a move toward 165 while capping their initial premium outlay. Conversely, those positioning for a BoJ surprise could use put spreads to profit from a potential sharp drop back toward the 158 level.
