Macro Trade Idea: Sell USD/JPY into 160 using a Bear Call Spread

‍Current USD/JPY Spot Ref: 159.24 (Spot as of 22 March 2026)

Lower call strike: 160

Upper call strike: 165

• A relevant macro trade would be to express a range-bound to mildly bearish view on USD/JPY near the 160 level via a bear call spread, selling the 160 call and buying a higher strike call as protection.
• The rationale is that USD/JPY has been supported by significant rate differentials between the Fed and the BOJ, which continues to favour USD strength as US rate cuts are further delayed with higher inflation risk partly caused by the Iran conflict. However, at current levels near 160, the pair is approaching a key psychological and potential intervention threshold, where Japanese authorities have historically stepped in to prevent excessive JPY weakness. This introduces a strong risk that upside becomes capped, even if the broader trend remains supportive of USD.
• Given this set-up, rather than buying calls into a resistance level, a bear call spread allows us to monetise the view that USD/JPY will struggle to break higher, while collecting premium and benefitting from time decay from selling call option.
• The structure also defines risk on the upside in the event of a breakout, making it a cost-efficient way to express a capped upside/ range bound view in this current market environment where BOJ intervention risk is increasingly relevant.
• Hence, I would look to sell upside via a bear call spread on USDJPY near 160, as I expect resistance at intervention levels. This allows me to monetise the view that USDJPY upside is capped by collecting premium, while also limiting risk by buying a call at a higher strike.

Summary of Key Global Central Bank Meetings in the past week

US FOMC: The FOMC left policy rates unchanged at 3.5%-3.75% last Wednesday, with the votes to leave rates on hold at 11-1. The latest dot plot also indicates a median expectation of only one 25bps cut by the end of 2026, maintaining a 3.4% policy rate, which was actually unchanged relative to the last forecast round in December. Despite this projection for one rate cut, the data reveals a meaningful shift towards fewer cuts among members due to persistent inflation, with seven policymakers expecting no cuts this year.

Bank of Japan: BOJ kept its benchmark interest rate unchanged on Thursday at 0.75%, in line with expectations, while maintaining a gradual normalization bias. Governor Ueda emphasized that BOJ maintains a data-dependent tightening path, and while underlying inflation is progressing toward the 2% target, supported by improving wage dynamics, there are elevated uncertainties from global factors – particularly rising energy prices linked to Middle East tensions.

European Central Bank: The ECB kept interest rates unchanged for a sixth consecutive meeting on Thursday, holding the key deposit rate at 2%. Due to inflationary risks from the Middle East conflict, policy makers signalled a more hawkish tone. Markets are now anticipating a faster tightening cycle, with three 25bps hikes priced in for this year, beginning as early as April.

Bank of England: The MPC unanimously voted 9-0 to hold the base interest rate at 3.75% on Thursday, halting the previous trend of rate cuts. The decision, driven by renewed inflation fears from surging energy prices due to the Middle East conflict, represents a shift from previously anticipated rate cuts toward a potentially longer hold or future hikes.