USD/JPY rose during Thursday’s North American session by nearly 0.30% and traded at 157.50. It held above 157.00 as the US Dollar gained support from weaker risk appetite, strong US jobs data, and hawkish remarks from Richmond Fed President Thomas Barkin. On the daily chart, a bullish engulfing pattern suggests buyers are in control near current levels. The move may be limited near 158.00 due to the risk of action by Japanese authorities.

Momentum And Key Technical Levels

Momentum remains positive, with the Relative Strength Index above its neutral line and still below overbought territory. Further upside would require a break above the March 3 high at 157.97. If 157.97 is cleared, the next levels are 158.50 and 159.00. Above that, targets include the January 23 high at 159.22 and then 160.00. The Yen is influenced by Japan’s economic performance, Bank of Japan policy, US–Japan bond yield differences, and market risk sentiment. The BoJ ran ultra-loose policy from 2013 to 2024, weakening the Yen, and began unwinding it in 2024, which has narrowed the 10-year US–Japan yield gap. Looking back at analysis from last year, we can see the strong bullish momentum that pushed USD/JPY toward 157.50. At the time, solid US jobs data and a hawkish Fed were the primary drivers for dollar strength. Now, in March 2026, the situation has evolved, and the pair trades closer to 150.50 as different factors take priority.

Rates Policy Divergence And Intervention Risk

The interest rate differential between US and Japanese bonds, a key factor mentioned in 2025, continues to steer the currency pair. Currently, the US 10-year Treasury yield sits at around 4.1%, while the 10-year Japanese Government Bond yield has risen to 0.75%, slightly narrowing the gap that previously favored the dollar so heavily. This narrowing trend is what we are focused on for the coming weeks. We have seen the Bank of Japan follow through on its policy shift, having exited negative interest rates late last year and signaling a potential for another small hike. This is happening just as the Federal Reserve is now projecting rate cuts for later in 2026, with recent US core PCE inflation data easing to 2.8%. The divergence in central bank policy that drove the dollar up is now beginning to reverse course. The threat of intervention by Japanese authorities, which was a concern near 158.00 in 2025, remains a critical ceiling for the market. We only have to remember the direct interventions seen in late 2022 when the pair pushed past 151.00, a level that is once again psychologically important. Any sudden spike in USD/JPY will likely be met with aggressive verbal warnings from Tokyo, capping upside. Given this backdrop, buying long-dated call options on USD/JPY appears to be a high-risk strategy. We believe traders should consider selling call spreads or outright selling out-of-the-money calls with strike prices above 152.50 to take advantage of the strong resistance and collect premium. This strategy positions for a range-bound or slightly lower movement in the pair over the next few weeks. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account