Insights 
VT 
On Tuesday, the US Dollar bears gained traction, pulling the USD/JPY pair lower to test the 153.25 support area during European trading. Market risk aversion, with European equity indexes down over 1%, alongside Japanese Finance Minister Satsuki Katayama’s comments, has supported the Yen.
The broader bullish trend for USD/JPY stays intact above the 153.00 level. Despite a break in the small triangle pattern, technical indicators show lower momentum, as the Relative Strength Index drops below 50, maintaining the bullish structure from mid-September.
Bears And Support Levels
Bears need to push below 153.00, where 61.8% Fibonacci retracement intersects with trendline support, to increase pressure towards 152.20. Resistance is expected at the 154.50 highs following October 30 and November 4, with 155.30 serving as a potential upside target.
The Japanese Yen has shown varying performance against major currencies, gaining 0.13% against the USD but declining against others such as GBP by 0.53% and NZD by 0.72%.
Elsewhere, GBP/USD fell to its lowest since April, influenced by UK borrowing cost comments, as the US Dollar strengthens. Gold prices have dropped to $3,950 per troy ounce, reacting to shifting Fed rate cut expectations in December.
Overall, cautious risk sentiment persists, with central bank actions and economic indicators influencing market dynamics.
US Dollar Momentum
The US Dollar’s momentum against the Yen has stalled, pulling back from the 154.45 area to test a critical support zone around 153.00. We are now at a pivotal point where the broader uptrend is at risk if this level fails to hold. The verbal warnings from Japanese officials are a significant factor, as we saw in late 2022 when direct intervention caused sharp, sudden moves in the yen.
For traders anticipating a breakdown, this is a moment to consider buying put options on the USD/JPY with a strike price below 153.00. A confirmed break of this support could trigger a rapid move toward the 152.20 low from late October. The recent rise in implied volatility means these options will be more expensive, but the risk of intervention makes a large, sudden drop a distinct possibility.
On the other hand, the dollar’s fundamental strength remains, with markets now pricing in only a 22% chance of a Federal Reserve rate cut in December, according to the CME FedWatch Tool. Should support at 153.00 hold, we could consider buying call options targeting a retest of the 154.50 highs and eventually the 155.30 level. The persistent interest rate difference between the US and Japan continues to favor a stronger dollar over the long term.
Turning to the British Pound, its weakness is clear as it falls to its lowest point since April of this year, below 1.3050. This downtrend is supported by concerns over UK borrowing costs, with 10-year gilt yields having recently pushed above 5.2%, their highest level in over a year. The dollar’s broad strength is simply amplifying the pound’s domestic problems.
This clear downward momentum in GBP/USD suggests a strategy of buying put options to position for further declines. We can look at strikes below the significant 1.3000 psychological level. As long as concerns about the UK economy persist, the path of least resistance for the pair appears to be lower.
Gold is also feeling the pressure from the strong US Dollar, slipping back toward $3,950 an ounce. This move reflects the market adjusting to the idea that the Federal Reserve will keep interest rates higher for longer. The Dollar Index (DXY) is trading near its highest level in three months, creating a direct headwind for commodities priced in dollars.
Given this backdrop, we should consider protective puts on gold futures or related ETFs. The inverse relationship between gold and the dollar is well-established, and as long as the dollar remains firm, gold may struggle to regain the $4,000 mark. A move below $3,950 could open the door for a deeper correction toward the next support level.
