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USD/JPY Price Forecast: Approaches 160.00 intervention threshold amid US-Iran tensions

  • USD/JPY gains positive traction for the fourth consecutive day amid a combination of factors.
  • Economic risks due to the Hormuz standoff and delayed BoJ rate hike bets undermine the JPY.
  • Inflation fears fuel hawkish Fed expectations and benefit the USD amid rising US-Iran tensions.

The USD/JPY pair builds on last week's bounce from the vicinity of mid-157.00s and prolongs its uptrend for the fourth straight day on Thursday. The Japanese Yen (JPY) continues to underperform amid economic concerns stemming from rising tensions in the Middle East and bets for a delayed rate hike by the Bank of Japan (BoJ). Moreover, persistent geopolitical uncertainties underpin the US Dollar's (USD) reserve currency status and lift spot prices to a one-and-a-half-week high during the first half of the European session.

US President Donald Trump announced a temporary extension of the Iran ceasefire on Tuesday, just hours before it was set to expire. Investors, however, remain skeptical about a durable de-escalation amid the lack of progress in peace talks and a standoff over the Strait of Hormuz. Furthermore, signs of friction between the US and Iran remained due to the American naval blockade of Iranian ports. Iran's chief negotiator, Mohammad Bagher Ghalibaf, said in a post on X that it is not possible for the strategic waterway to be opened as the US naval blockade is a blatant violation of the ceasefire. This fuels worries that Japan's economy will come under substantial strains due to continued disruptions to energy supplies from the Middle East and undermines the JPY.

Meanwhile, reports, citing sources, suggest that the Bank of Japan (BoJ) is leaning towards standing pat this month as fading prospects of a near-term end to the Middle East war keep the ‌country's economic and price outlook highly uncertain. This turns out to be another factor weighing on the JPY. The BoJ, however, is still expected to signal its readiness to raise borrowing costs as soon as June in the face of mounting inflationary pressures. Apart from this, speculations that Japanese authorities will step in to stem further weakness in the domestic currency might hold back the JPY bears from placing aggressive bets and cap the USD/JPY pair near the 160.00 psychological mark. That said, any meaningful corrective slide seems elusive in the wake of the bullish USD.

Elevated Crude Oil prices revive inflationary fears and temper dovish US Federal Reserve (Fed) expectations. This leads to a further rise in US Treasury bond yields and remains supportive of the bid tone surrounding the USD, suggesting that the path of least resistance for the USD/JPY pair is to the upside. Traders now look forward to the US economic docket, featuring the release of the usual Weekly Initial Jobless Claims and the flash PMIs, for some impetus. The focus, however, will remain glued to developments surrounding the US-Iran saga, which might continue to infuse volatility in the financial markets and produce trading opportunities.

USD/JPY daily chart

Chart Analysis USD/JPY

Technical Analysis:

Barring a few knee-jerk reactions, the USD/JPY pair has been oscillating in a range since mid-March. Against the backdrop of the recent goodish rebound from a technically significant 200-day Exponential Moving Average (EMA), this might still be categorized as a bullish consolidation phase and validates the positive outlook.

Moreover, momentum oscillators are constructive rather than stretched. The Relative Strength Index (RSI) is hovering around 57, suggesting steady upside pressure without an overbought signal. That said, the Moving Average Convergence Divergence (MACD) line remains marginally below zero, hinting at only modest downside momentum that so far has not challenged the underlying trend support.

Bulls, however, need to await a sustained strength and acceptance above the 160.00 psychological mark before positioning for further gains. Meanwhile, pullbacks are likely to be viewed as corrective within the broader bullish structure as long as the USD/JPY pair holds above the long-term average around 154.76. A convincing break below that zone would be required to signal a more meaningful shift in trend.

(The technical analysis of this story was written with the help of an AI tool.)

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Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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