The US Dollar (USD) may continue its strength, though it might not reach the level of 157.20. For further gains towards 157.90, the USD needs to close above 157.20, as per analysts from UOB Group.
In the past 24 hours, the USD rose from 155.85 to a high of 156.95, despite expectations that momentum was insufficient to break through 156.20. There remains a possibility for additional USD strength, but conditions are currently stretched, and the USD might not reach 157.20 today. It is essential for the USD to maintain above 156.30, with minor support found at 156.55.
Performance Outlook
In a 1-3 week outlook, the USD has shown a strong performance by closing at 156.86, surpassing the ‘strong resistance’ level of 156.20. Although downward pressure has alleviated, a close above 157.20 is required for further upward movement towards 157.90. Chances of the USD closing above 157.20 may increase if the ‘strong support’ level at 155.80 holds firm in the coming days.
We see significant resistance for USD/JPY at the 157.20 level, making further gains difficult in the immediate term. The recent rapid ascent has pushed the pair into deeply overbought territory, suggesting caution for new long positions. This presents an opportunity for selling short-dated call options with strikes above 157.20 to collect premium on the expectation that this ceiling will hold.
This dollar strength is underpinned by the latest U.S. economic data from late November and early December 2025, which showed inflation remaining stubbornly above 3.1% and a resilient labor market with over 190,000 jobs added. In contrast, the Bank of Japan has maintained its dovish policy, keeping the interest rate differential between the U.S. and Japan historically wide. This fundamental divergence continues to favor the dollar over the yen.
Intervention Risks
Traders must remain vigilant for potential intervention from Japanese authorities, as these levels are highly sensitive. We remember the significant yen-buying operations that occurred back in 2022 when the pair pushed past 150, and the verbal warnings that intensified through 2024 as it approached 160. Any sudden, sharp move higher could trigger a defensive response from the Ministry of Finance.
For the current upward momentum to continue, the pair must hold above the key support level now identified at 155.80. A close below this level would invalidate the bullish outlook and suggest the recent upward push has failed. Derivative traders could use this 155.80 mark as a reference point for placing stop-losses on long positions or for purchasing protective put options.
