USD/JPY Price Forecast: Bulls retain control as economic woes counter intervention fears

The USD/JPY pair turns positive for the fourth straight day following an intraday dip to the 159.45 area and touches a fresh high since July 2024 during the early European session on Friday. Given that Japan depends mostly on oil imports from the Middle East, the ongoing Iran war has been fueling worries that Japan’s economy will come under substantial strain in the foreseeable future. This, in turn, continues to undermine the Japanese Yen (JPY), which, along with the emergence of some US Dollar (USD) buying, acts as a tailwind for the currency pair. However, intervention fears might hold back the JPY bears from placing fresh bets and cap any further upside for spot prices.

The JPY hovers around the key 160 psychological mark against the USD, a key threshold level at which authorities stepped into the currency market multiple times in 2024. Moreover, Japan's Finance Minister Satsuki Katayama has signaled that authorities are ready to take "bold" and "decisive" steps against excessive volatility in the currency market. The market implication, however, has been limited amid contrasting headlines over peace talks to end the war in the Middle East. Furthermore, supply disruptions caused by the effective closure of the Strait of Hormuz remain supportive of elevated energy prices, which could worsen Japan’s trade balance and weaken its economic outlook.

Despite US President Donald Trump's ceasefire rhetoric, comments from Iranian officials dampen hopes for an immediate de-escalation of tensions. Meanwhile, Trump announced that he will delay strikes on Iran’s energy infrastructure and extended the deadline to reopen the Strait of Hormuz until April 6. Investors, however, remain worried about a further escalation of the conflict amid the deployment of additional US troops in the region. This keeps geopolitical risks in play, which, along with bets for an interest rate hike by the US Federal Reserve (Fed), lifts the USD closer to the weekly high. The fundamental backdrop, in turn, backs the case for a further USD/JPY appreciation.

USD/JPY daily chart

Technical Analysis:

Against the backdrop of the recent rebounds from the critical 200-day Exponential Moving Average (EMA), a sustained move and acceptance above the 160.00 mark will be seen as a fresh trigger for bullish traders. The Relative Strength Index hovers around 61, staying in bullish territory without overbought conditions, which signals ongoing buying pressure but reduced urgency to extend the rally aggressively.

However, the Moving Average Convergence Divergence (MACD) line has flattened just above the zero line with only a slight positive edge over its signal line, suggesting waning but still positive momentum. Hence, it will be prudent to wait for some follow-through buying before positioning for further gains towards the next relevant hurdle near the 160.50 region en route to the 161.00 round-figure mark.

On the downside, initial support emerges at 158.50, followed by firmer demand near 157.70, the prior breakout area. A daily close below 157.70 would weaken the bullish structure and expose the 156.20 consolidation zone, well above the 200-day EMA. As long as the USD/JPY pair remains above 158.50, dips are more consistent with consolidation inside an ongoing uptrend rather than a completed top.

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