Cherry Bomb: Dollar Dumps, Yen Pops; Two Bullish Currency Plays
Cherry Bomb: Dollar Dumps, Yen Pops; Two Bullish Currency Plays
By:Tom Preston
If you were planning on a trip overseas anytime soon, that trip is now looking more expensive. The US Dollar bottomed out over the past few days against major currencies. UUP, the Invesco US Dollar Index Fund ETF, is at its lowest price in 45 months.
Blame the Dollar sell-off on the Greenland dispute, uncertainty about the next Fed Chair, and more tariffs. But it was the U.S. Treasury’s “rate check” that caused the market to dump Dollars. Acting on behalf of the U.S. Treasury, the NY Fed asked currency dealers what price they might be able to buy the Japanese Yen for if they wanted to do so. It’s not an order for a transaction. It’s not binding. But the mere hint that the Treasury could be working to push the Dollar lower was enough to drive the Yen and other major currencies up vs the US Dollar.
They had spent most of 2025 flat to lower, but rallied sharply over the past couple of weeks.
Their IVs rose along with their futures prices, which is fairly typical for currencies.
With the U.S. Treasury leaning on the Dollar, that could keep upward pressure on these currencies. Their OTM calls are trading over equidistant OTM puts, indicating that the market sees more risk to the upside. Let’s check out bullish trades in two of them with the highest IV ranks.
Trade Ideas
/6JH6 Short 0.0064/0.0065 Put Vertical March Expiration, 38 DTE, 0.000033 Credit
The Japanese Yen futures /6JH6 have been one of the weakest over the past year, but any suspicions that the U.S. Treasury might be working with the Bank of Japan to push the Yen higher could keep it moving higher. The short .0064/.0065 put vertical in the March expiration with 38 DTE is a bullish strategy that has a $412.50 max potential profit vs an $837.50 max potential loss, has a 70% probability of profit at expiration, and that generates $3.84 of positive daily theta.
/6CH6 Short 0.725/0.735 Put Vertical March Expiration, 38 DTE, 0.0031 Credit
The Canadian Dollar futures /6CH6 have been underperforming the other currencies recently on concerns about the country’s strong stance against the Trump administration’s moves on Greenland and tariffs. But a weaker US Dollar would be bullish for the Canadian Dollar, too. The short .725/.735 put vertical in the March expiration with 38 DTE is a bullish strategy that has a $310 max potential profit vs an $690 max potential loss, has a 70% probability of profit at expiration, and that generates $1.96 of positive daily theta.
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