Yen Weakness and BoJ Rate Hike Expectations
We see the Japanese Yen remaining weak against the US dollar, even with Japan’s May Producer Price Index data coming in stronger than expected. The currency is currently underperforming most of its G10 peers as we head into the North American session. As of today, June 10, 2026, the USD/JPY is trading around 158.50. The market has fully priced in a 25 basis point interest rate hike from the Bank of Japan at its meeting next week on June 17. In fact, overnight index swaps now show a 95% probability of this hike occurring, with another full hike expected by the end of the year. This hawkishness is supported by Japan’s latest national CPI data, which showed inflation holding firm at 2.9% year-over-year.Technical Outlook and Options Strategy
Given this momentum, we believe the technical picture for USD/JPY remains bullish, with limited resistance before the 162 level. We would consider buying near-term USD/JPY call options to capitalize on this expected upward move. The rising Relative Strength Index suggests strong buying pressure, though it is approaching overbought territory. However, traders must remain cautious of potential government intervention, as we last saw from the Ministry of Finance when the rate crossed 160 back in late 2024. This history makes holding outright long positions risky as we approach that key psychological level. One-month implied volatility has already ticked up to 9.5% in anticipation of the BoJ meeting and potential currency intervention. To manage this risk, we favor using a bull call spread rather than buying an outright call. For instance, buying a 159 strike call while simultaneously selling a 161.50 strike call for the July expiry could be an effective strategy. This approach defines the risk and cheapens the cost of the trade while still profiting from a move towards our target just below 162.Start trading now — click here to create your real VT Markets account.
