Increased USD Momentum
The US Dollar (USD) could continue to strengthen, possibly rising to 150.15, though reaching 150.90 is less likely. The current advance falls within the 149.20/150.15 range, according to analysts from UOB Group.
Over the past day, the USD unexpectedly surged to 149.92 from an expected 148.20 to 149.15 range. However, the upward momentum may be unsustainable due to negative divergence and overbought conditions.
Potential Gains and Risks
In a 1-3 weeks view, the USD recently exceeded expectations by hitting 149.92. While momentum appears excessive, there is potential for further rises, contingent on the USD remaining above a strong support level of 148.50.
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We see the US Dollar trading in a new, higher range, likely between 149.20 and 150.15, after its recent surge. While momentum could push the dollar toward the 150.15 level in the coming weeks, the advance appears overbought. This suggests that further gains will likely be a struggle, making aggressive long positions risky.
Considering the overbought conditions and negative divergence, selling call options with strikes above 150.90 could be a prudent strategy. This approach allows traders to collect premium while betting that the dollar’s rally will stall before reaching that major resistance level. The probability of the dollar sustaining a move significantly above 150.15 appears low for now.
Fundamental Support for the Dollar
This upward pressure on the dollar is fundamentally supported by a wide interest rate gap. The Federal Reserve has held rates steady through most of 2025 to combat persistent inflation, with the latest US CPI data for August 2025 coming in at 2.8%. In contrast, Japan’s inflation remains subdued at 1.9%, giving the Bank of Japan little reason to abandon its ultra-low interest rate policy.
We must also remember the market’s memory of late 2022, when Japanese authorities intervened heavily as the dollar approached the 152.00 level. This historical precedent makes the 150.90 zone a psychological barrier, where the risk of official intervention to weaken the dollar increases substantially. Traders should therefore be cautious about holding long positions as we approach these historically sensitive levels.
For those protecting against a reversal, a break of the 148.50 support level would be a key signal that the bullish momentum has faded. Therefore, buying put options with a strike price just below 148.50 offers a defined-risk way to position for a potential breakdown. This level serves as our line in the sand for the current upward trend.
