USD\/JPY rose at the start of the week and moved back towards last week\u2019s swing high, but it stayed below 157.00 in the Asian session. The move lacked follow-through.<\/p>\n
Markets were unsettled after a coordinated US\u2013Israel military strike on Iran. Concerns that the Strait of Hormuz could be closed raised fears of higher oil prices and a global economic downturn, supporting the US Dollar.<\/p>\n
Demand for safer assets and expectations that the Bank of Japan will continue policy normalisation offered support to the Japanese Yen. Fears of official action to limit further Yen weakness also weighed on USD\/JPY.<\/p>\n
\u201cRisk-on\u201d and \u201crisk-off\u201d describe how willing market participants are to take risk. Risk-on is linked to buying riskier assets, while risk-off is linked to moving into safer assets.<\/p>\n
In risk-on conditions, shares, most commodities other than gold, commodity-linked currencies, and cryptocurrencies often rise. In risk-off conditions, bonds, gold, and safe-haven currencies such as the US Dollar, Japanese Yen, and Swiss Franc often gain.<\/p>\n
In risk-on phases, the Australian Dollar, Canadian Dollar, New Zealand Dollar, rouble, and South African rand often strengthen. In risk-off phases, the US Dollar, Yen, and Swiss Franc tend to strengthen.<\/p>\n
We are seeing the market react to a significant risk-off event with the military strike on Iran. The immediate flight to safety is boosting the US Dollar, which is acting as a tailwind for the USD\/JPY pair. Brent crude futures have surged past $110 a barrel in the past week on fears of the Strait of Hormuz closing, amplifying concerns about a global economic slowdown and further strengthening the dollar.<\/p>\n
This geopolitical shock is happening when US economic data remains robust, with last month\u2019s Core PCE Price Index data for January 2026 showing inflation is still proving sticky at 3.1%. This makes the dollar a clear winner in the current environment, as it benefits from both safe-haven flows and a hawkish Federal Reserve. Derivative traders should note the upward pressure on the pair is supported by these strong fundamentals.<\/p>\n
However, the Japanese Yen is also a traditional safe-haven currency, which is putting a cap on the pair’s rise around the 157.00 level. We remember well the Ministry of Finance’s massive interventions to support the yen back in the autumn of 2022 when the pair pushed past 151. The fear that Japanese officials could step in at any moment is creating significant resistance and preventing a breakout.<\/p>\n
Given these opposing forces, implied volatility in USD\/JPY has spiked, with one-month options pricing in much larger swings than we saw at the start of the year. This suggests that instead of making simple directional bets, traders should consider strategies that profit from this increased volatility, such as long straddles or strangles. These positions would benefit from a large price move in either direction, which seems likely in the coming weeks.<\/p>\n
A prudent approach would also involve using options to define risk. Buying far out-of-the-money puts on USD\/JPY could serve as a low-cost hedge against a sudden de-escalation of tensions or a surprise intervention by Japanese authorities. This provides a form of insurance against a sharp reversal lower, which remains a distinct possibility.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/JPY edged higher but stalled below 157.00 as Iran strike jitters fueled safe-haven flows and caution.<\/p>\n","protected":false},"author":103,"featured_media":17045,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-50483","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/50483","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=50483"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/50483\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17045"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=50483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=50483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=50483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}