USD/JPY Price Forecast: Profit-taking kicks in after fresh intervention warnings

USD/JPY retreats sharply from 21-month top after as verbal intervention from Japanese authorities.
Economic risks due to Iran tensions could limit JPY gains and support the pair amid a bullish USD.
The US-Iran stalemate and the Fed’s hawkish tilt on Wednesday should act as a tailwind for the buck.

Haresh Menghani FXStreet

The USD/JPY pair builds on the previous day's breakout momentum beyond the 160.00 psychological mark, hitting a fresh high since July 2024 on Thursday. Economic concerns stemming from Middle East tensions counter the Bank of Japan's (BoJ) hawkish pause and continue to undermine the Japanese Yen (JPY). Adding to this, sustained US Dollar (USD) strength provided an additional boost to the currency pair. The momentum, however, runs out of steam during the early part of the European session amid speculations that Japanese authorities will step in to stem further JPY weakness.

The BoJ decided to keep its benchmark interest rate unchanged at 0.75% on Tuesday. However, the 6-3 vote split, with three BoJ board members calling for a rate hike, along with upward revision of inflation forecasts, left the door open for a June or July rate hike. The initial market reaction, however, turned out to be short-lived amid worries that Japan's economy will come under strains in the foreseeable future due to the continued disruption of supplies through the Strait of Hormuz. In fact, shipping traffic through the strategic waterway has seen a sharp decline recently due to Iran's restrictions on movements and the US naval blockade of Iranian ports. Furthermore, US President Donald Trump said on Wednesday that the blockade will continue till Iran agrees to a deal.

Meanwhile, Japan's Finance Minister Satsuki Katayama said that they are moving closer to taking decisive action in the foreign exchange markets. Adding to this, Japan’s top currency diplomat, Atsushi Mimura, said that they are coordinating with the US, based on their FX agreement in September last year, prompting some intraday short-covering around the JPY. The US Dollar (USD), on the other hand, retreats from its highest level since April 13. This turns out to be another that contributed to the USD/JPY pair's sharp intraday downfall of over 100-pips from the 160.70-160.75 region. Any meaningful USD depreciation, however, seems elusive in the wake of stalled US-Iran peace talks and the US Federal Reserve's (Fed) hawkish tilt on Wednesday.

US President Donald Trump rejected Iran's proposal to end the two-month conflict and reiterated that there will be no peace deal unless the Islamic Republic agrees to give up its nuclear program. Trump added that the US naval blockade of Iranian ports will continue. This remains supportive of elevated Crude Oil prices, reviving inflationary concerns. Adding to this, the Fed's decision to hold its key policy rate unchanged at 3.50%-3.75% saw the highest number of dissents since 1992, with three policymakers voting against the accommodative tone in the policy statement. Traders were quick to react and sharply reduced their bets on any further easing by the Fed in 2026, instead they are now pricing in over a 10% chance of a rate increase, which, in turn, favors the USD bulls.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before confirming that the USD/JPY pair has topped out in the near term and positioning for any further depreciating move. Traders now look to the US economic docket, featuring the release of the Advance Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index. The crucial data will play a key role in influencing the near-term USD price dynamics and provide a fresh impetus to the USD/JPY pair later during the North American session.

USD/JPY 1-hour chart

Technical Analysis:

The sharp intraday pullback drags spot prices to the 159.50-159.40 confluence – comprising the 38.2% Fibonacci retracement level of the recent move up from the monthly swing low and the 200-hour Simple Moving Average (SMA). Meanwhile, the Relative Strength Index (RSI) reading around 34 hints at weak demand after the latest unwind. Moreover, the Moving Average Convergence Divergence (MACD) has turned negative, reinforcing soft downside pressure.

A clean break below the 159.50-159.40 confluence would expose the 50.0% retracement at 159.15, followed by deeper Fibonacci supports at 158.79 and 158.27, before a more solid floor appears near the 157.60 region. On the topside, initial resistance is aligned at the 38.2% retracement at 159.52, with further barriers at the 23.6% retracement near 159.97 and the recent swing high around 160.70, where selling interest could re-emerge.

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

Author

Haresh Menghani

FXStreet

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

AUD/USD edges lower to near 0.6850 on robust US jobs data

The AUD/USD pair trades with mild losses around 0.6860 during the early Asian session on Monday. Stronger-than-expected US employment data provide some support to the US Dollar against the Australian Dollar. Traders brace for China’s Consumer Price Index inflation report, which is due later in the day.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold loses the grip; $4,000 comes next on the downside

Gold sets aside two daily advances in a row on Friday, opening the door to a potential test of the key $4,000 mark per troy ounce. The precious metal’s retracement follows a decent improvement in the sentiment surrounding the US Dollar, solid NFP data and higher US Treasury yields across the board.

Week ahead: Inflation and geopolitics in focus as US political landscape shifts

It has been a rollercoaster week, with the initial market nervousness being replaced by strong risk appetite on Wednesday, which proved very short-lived, as risk assets suffered on Thursday. The result of the US midterm elections, with the Democrats performing exceptionally well and taking control of Congress, confused investors, although it is too early to judge if current trends will persist.

Week ahead – Inflation and geopolitics in focus as US political landscape shifts

Post-midterm election euphoria fizzles out as risk aversion prevails. US CPI, PPI and Fedspeak on the radar as Fed hike bets remain supported. Oil retreat pauses on mixed hopes about the ongoing conflicts.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.