Insights 
VT 
USD/JPY Range-Trading Phase
The USD/JPY pair may drop to 151.20, with further decline below this level currently unlikely. Analysts suggest that price movements are early indicators of a range-trading phase between 149.50 and 153.00.
In the last 24 hours, the USD traded within a range of 151.58/152.61, closing at 151.83, down 0.29%. Today, there is potential for the USD to edge lower and test 151.20, though a significant breach is not anticipated. Resistance levels are noted at 152.00 and 152.40.
In the next 1-3 weeks, analysts maintain their view that USD/JPY’s movements are part of a range-trading phase, most likely between 149.50 and 153.00. Further attention is drawn to USD retreats due to trade tensions, Fed easing bets, and US fiscal gridlock.
Market observations include the rise in GBP/USD and AUD/USD, supported by shifts in US monetary stance and inflation risks flagged by the RBA. Additionally, gold remains stable below record highs amidst US-China trade tensions. Bitcoin’s recovery faces limitations due to ongoing trade tensions and government shutdown issues.
Market Strategy Adjustments
Given the view that USD/JPY is entering a range-trading phase, we should adjust our strategies away from expecting strong directional trends. The immediate focus is on a potential test of the 151.20 support level, driven by broader US dollar weakness. This environment suggests that buying short-dated put options could be a tactical way to capitalize on this mild downward momentum.
The fundamental backdrop for a weaker dollar is building, as recent US data showed Q3 GDP growth was revised down to just 0.8%, while the latest core PCE inflation figure cooled to 2.7%. This contrasts with Japan’s core inflation, which has now remained above the Bank of Japan’s 2% target for over 18 consecutive months, increasing pressure on the BoJ to eventually signal policy normalization. This policy divergence reinforces the view that the dollar’s strength against the yen may have peaked for now.
For the coming weeks, the predicted 149.50 to 153.00 range makes selling volatility an attractive proposition. We can look at strategies like selling strangles or setting up iron condors with strikes placed just outside this expected range. Implied volatility for one-month USD/JPY options has already compressed to near 8.5%, down from over 12% during the intervention scares we saw back in early 2024, making these positions potentially profitable from time decay.
Looking at the broader market, significant fiscal gridlock in Washington and lingering trade tensions with China are weighing on the dollar. This is happening as gold prices remain elevated near $4,200 per ounce, a level not seen since the market turmoil of late 2024, signaling a flight to safety. Therefore, any long USD positions should be hedged, as sentiment could sour quickly and push USD/JPY toward the lower end of its new range near 149.50.
