USD/JPY extended a three-day rebound to about 157.80 in Thursday’s European session as the yen eased on profit-taking after last week’s sharp rise that followed joint US-Japan currency intervention aimed at countering excessive volatility and disorderly moves. Markets are looking for further evidence that the yen’s intervention-led strength can be sustained, with attention turning to domestic policy follow-through. Japan’s Finance Minister Satsuki Katayama said the country “won’t hesitate” to conduct additional foreign-exchange intervention with the US, while the US dollar’s near-term direction is expected to hinge on July’s Nonfarm Payrolls due on Friday.
BNY Mellon said the coordinated action “has bought time” but did not materially lift foreign yen holdings, adding that positioning remains net long but below H1 2026 levels and unlikely to rebuild without Bank of Japan tightening, fiscal consolidation and structural reform. In asset allocation terms, it described Japanese equities as largely passive and under-supported, while Japanese government bonds are drawing the clearest marginal demand. Technically, USD/JPY was near 157.83 and below the 20-day EMA at 160.55; resistance sits at 160.55, with support at the two-month low of 155.23 and then around 154.00, the February 23 low.
Derivative Trading Strategies Ahead of Payrolls
We suggest derivative traders prepare for increased volatility as USD/JPY hovers around 157.80 ahead of tomorrow’s crucial U.S. Nonfarm Payrolls release. With the pair trading below its 20-day exponential moving average of 160.55, the near-term momentum remains tilted to the downside. We recommend establishing bearish option strategies, such as buying put options targeting the two-month low near 155.00.
Risks and Tactical Bias
Our bearish bias is heavily supported by Japan’s proven willingness to defend the 160.00 threshold, historically backed by massive interventions like the 9.8 trillion yen ($62 billion) spent during previous currency rescues. Because Tokyo has recently reaffirmed its readiness to conduct joint interventions with the U.S., any spike toward 160.00 offers a highly favorable risk-reward ratio for short positions. Traders can utilize short-call spreads to collect premium while capping risk just above the 160.55 resistance level.
For the immediate payrolls risk tomorrow, we favor buying short-dated straddles to profit from a sharp breakout in either direction. Historical precedents show that major U.S. labor market surprises coupled with active central bank threats can easily trigger 200 to 300-pip swings within hours. If the payrolls data misses expectations, we expect a rapid slide toward the key support levels at 155.23 and potentially 154.00.
