USD/JPY is consolidating above its 50-day moving average. This maintenance of upward momentum is as the pair seeks to exit its trading range established since November, according to Société Générale’s FX analysts.
The pair maintains key support around 156. Successful defence of this support could lead to a continued uptrend, aiming for last year’s peak range of 158.90/159.10 and projections near 160.70.
Potential Breakout
The USD/JPY pair is signaling a potential upward move, having held firm above its 50-day moving average since November of last year. We are now seeing the pair challenge the top of its recent trading range. This persistent upward pressure suggests that a breakout could be imminent.
For traders looking to position for this, buying call options with February or March 2026 expiry dates could be a direct way to play the upside. Strikes around the 158.00 level would offer a good balance of risk and reward if the breakout materializes. This strategy benefits from defined risk while capturing potential gains toward higher targets.
This bullish outlook is supported by fundamental economic data. The latest US inflation figures from December 2025 came in at a stubborn 2.9%, keeping the Federal Reserve’s policy rate at 4.75%, while the Bank of Japan’s overnight call rate remains pegged near 0.0%. This significant interest rate differential continues to make holding US dollars more attractive than the yen.
Alternative Strategies
We saw a similar pattern last year, when the pair defended the 156.00 level before ultimately rallying to the 2025 peak near 159.10. That historical price action adds weight to the idea that the current consolidation is a staging ground for another leg higher. The next objectives we are watching are that 159.10 level and then projections up toward 160.70.
An alternative approach for the coming weeks involves selling put spreads with the short strike below the key 156.00 support level. This strategy is for those who believe the floor will hold, allowing them to collect premium from the options’ time decay. It is a less aggressive way to express a bullish-to-neutral view on the pair.
