The USD/JPY exchange rate is expected to keep rising, with focus on the level of 158.90, according to FX analysts at UOB Group. On a 24-hour view, strong USD momentum suggests further strength, though the overbought condition makes 158.90 unattainable today. Any pullback is likely to stay above 157.40, with minor support at 157.75. Despite higher momentum starting to slow, the USD could rise within a 157.60/158.40 range, unlikely to surpass 158.35.
For the 1-3 weeks view, USD soared, indicating its continued rise, suggesting the key level to watch is 158.90. The sentiment remains as long as USD stays above the ‘strong support’ at 157.00. These insights are derived from observations by the FXStreet Insights Team, which comprises journalists providing market coverage from various experts. Their reports include notes from commercial sources and analytical insights from both internal and external contributors.
Historical Perspective
Looking back at this time last year, in January 2025, the analysis suggested that the dollar was likely to continue its rise against the yen. The level to watch then was 158.90, a high from the previous year. That outlook proved correct as the pair eventually pushed well beyond that mark during 2025.
The core reason for dollar strength remains the same today, driven by the significant difference in interest rates between the U.S. and Japan. Recent U.S. jobs data for December 2025 showed a robust addition of over 215,000 jobs, reinforcing the Federal Reserve’s stance to hold rates firm at 5.0%. This contrasts sharply with Japan, where the central bank has only just brought its main rate to 0.0%, ending years of negative policy.
With the pair currently trading around 161.75, the upward momentum we saw developing last year appears poised to continue. The wide policy divergence supports the dollar, making it the more attractive currency for yield-seeking investors. Therefore, the path of least resistance for USD/JPY seems to be upwards in the coming weeks.
Trade Strategy
For traders, this outlook suggests buying call options to profit from a potential continued rise. A strategy could involve purchasing calls with strike prices of 163.00 and 164.00 expiring in late February or early March. This allows traders to capture gains if the dollar continues to strengthen as expected.
However, we must be cautious of the risk of sudden policy shifts or direct market intervention by Japanese authorities, as was seen when the currency pair crossed the 160 level in 2024. To manage this risk, it is wise to protect long positions by purchasing some out-of-the-money put options. A key support level to watch is 159.50, and protective puts below this could guard against any sharp reversals.
