USD/JPY Price Forecast: Bullish bias remains amid fragile Iran ceasefire, ahead of US PCE

The USD/JPY pair builds on the previous day's modest rebound from sub-158.00 levels, or a nearly three-week low, and gains some positive traction on Thursday. Spot prices climb back above the 159.00 round figure during the first half of the European session and draw support from a combination of factors. The Japanese Yen (JPY) is undermined by economic concerns stemming from Middle East conflicts, which, along with a modest US Dollar (USD) uptick, acts as a tailwind for the currency pair.

Given that Japan depends mostly on oil imports from the Middle East, investors remain concerned that the economy will come under substantial strains in the foreseeable future due to continued disruptions to shipping through the Strait of Hormuz. In fact, Iran once again shut down traffic through the strategic waterway and threatened to withdraw from the ceasefire in response to brutal Israeli attacks on Lebanon. Israeli forces have carried out a devastating bombardment across Lebanon, saying that the ceasefire was not extended to Lebanon due to the role of the armed group Hezbollah. The White House also confirmed that Lebanon is not part of the two-week ceasefire drawn up between Iran and the US.

Furthermore, US President Donald Trump warned of renewed strikes if the Iran deal fails, suggesting that escalation risks remain on the table. This, to a larger extent, overshadows the US Federal Reserve's (Fed) balanced outlook and offers some support to the USD, which maintains its status as the global reserve currency. Minutes from the March 17–18 FOMC meeting released on Wednesday revealed a higher-for-longer stance, with officials in no rush to cut interest rates amid upside risks to inflation stemming from Middle East energy price shocks. That said, policymakers still signaled one rate reduction by the end of this year and another in 2027, though the timing remains unclear.

Meanwhile, the USD bulls seem hesitant and opt to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index, due later during the North American session. Apart from this, the crucial US Consumer Price Index (CPI) report on Friday will be looked upon for more cues about the Fed's policy path and determine the near-term trajectory for the USD. Apart from this, geopolitical developments might continue to infuse volatility across the global financial markets and influence the USD/JPY pair.

USD/JPY 4-hour chart

Technical Analysis

From a technical perspective, spot prices showed some resilience below the 158.25-158.20 support, and the subsequent move up favors bullish traders. That said, the Relative Strength Index (RSI) near 50.0 suggests neutral momentum after recovering from oversold territory, while the Moving Average Convergence Divergence (MACD) indicator, hovering just below the zero line, hints at still-soft but stabilizing downside pressure.

Meanwhile, further upside would likely see the USD/JPY pair probing prior price highs on the chart. On the downside, the aforementioned support coincides with the 200-period Exponential Moving Average (EMA) and marks the key level that buyers would be expected to defend to preserve the current constructive structure on this timeframe. A sustained break below would weaken the bullish bias and expose deeper corrective potential.

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