UOB said USD/JPY kept an upside bias over the next 24 hours, after the pair briefly dipped to 162.05, rose to 162.70, and then closed at 162.58, up 0.30%. The bank sees room for a test of 162.80 before any pullback, while judging the 163.00 resistance level unlikely to come into play. On the downside, support was set at 162.35, and a break of 162.20 would point to range trading rather than a push towards 162.80.
Over a 1–3 week horizon, UOB maintained a mixed outlook and expects the pair to trade between 160.60 and 163.00; it referenced its 07 Jul update when spot was 162.10 and said volatility has since eased without altering that view. Over 1–3 months, the advance is viewed as intact provided USD/JPY holds above the 21-day EMA at 161.00.
USD/JPY Drivers And Near-Term Trading Levels
We see the US dollar maintaining its strength against the yen, with a potential test of the 162.80 level in the coming days. This move is supported by this week’s US jobs report, which showed the addition of 210,000 non-farm payrolls, dampening expectations for an imminent Federal Reserve rate cut. The wide interest rate differential between the US and Japan therefore remains the key market driver.
For traders looking to capture this short-term move, we are considering buying weekly call options with a strike price around 162.50. However, significant resistance at the 163.00 level suggests that any gains might be capped there. This makes selling call options with a 163.00 strike, creating a call spread, an attractive strategy to limit costs and define risk.
Medium-Term Range And Options Strategy
In the coming weeks, we anticipate the pair will trade within a 160.60 to 163.00 range, as the threat of intervention from Japan’s Ministry of Finance will likely curb excessive yen weakness. Looking back at the interventions in late 2024, authorities showed a low tolerance for moves beyond the 160 level. This expected range-bound activity makes strategies like selling strangles or iron condors particularly appealing to collect premium.
We are watching the 21-day exponential moving average, currently around 161.00, as a critical support level. A decisive break below this would signal that the recent upward momentum is failing, potentially opening a move towards the 160.60 lower boundary. To hedge against this, we are holding some long put options as protection for our bullish positions.
