USD/JPY Price Forecast: Struggles to lure buyers amid JPY intervention fears; US NFP eyed

The USD/JPY pair struggles to capitalize on the previous day's modest gains and trades with a mild negative bias through the first half of the European session on Friday. Despite renewed hostilities in the Strait of Hormuz, investors remain hopeful for a US-Iran peace deal. This, along with diminishing odds for a rate hike by the US Federal Reserve (Fed) in 2026, prompts some US Dollar (USD) selling. Furthermore, speculations that Japanese authorities will step in again to prop up the domestic currency and the Bank of Japan's (BoJ) hawkish outlook support the Japanese Yen (JPY), which contributes to capping the currency pair.

The US Central Command said Thursday that US forces targeted Iranian military facilities responsible for launching attacks against warships transiting through the strategic waterway. Earlier, Iran accused the US of violating the ceasefire by striking multiple targets in and around the strait. However, US President Donald Trump said that a ceasefire with Iran is still in place and added that it would be obvious if the ceasefire was over. Adding to this, the US military stated that US forces do not seek escalation. This, in turn, triggers a fresh leg down in Crude Oil prices, easing inflationary concerns and tempering bets for a more hawkish US Federal Reserve (Fed). The outlook, in turn, keeps a lid on a further move up for the buck and the USD/JPY pair.

The Japanese Yen (JPY), on the other hand, draws some support from reports that officials intervened in the FX market during holidays in early May, after having conducted JPY buying operations on April 30. Moreover, Japan's top currency diplomat, Atsushi Mimura, had said on Thursday that Japan faces no constraints on how often it can intervene on currency markets and is in daily contact with US authorities. This reinforces that Japan remains committed to stemming speculative JPY moves. Adding to this, BoJ's upward revision of inflation forecasts and the 6-3 hawkish vote split signaled a potential rate increase as soon as June. This marks a significant divergence in comparison to fading hawkish Fed expectations and benefits the lower-yielding JPY.

Traders, however, seem reluctant to place aggressive directional bets and opt to move to the sidelines ahead of the release of the closely-watched US monthly employment details. The popularly known US Nonfarm Payrolls (NFP) report is expected to show that the economy added 62K new jobs in April, which marks a significant slowdown from the previous month's reading of 178K. Meanwhile, the Unemployment Rate is forecast to hold steady at 4.3%, while Average Hourly Earnings might have risen by 3.8% YoY in April. The data will play a role in influencing expectations about the Fed's policy stance. Apart from this, fresh developments surrounding the Middle East crisis will drive the USD and provide some meaningful impetus to the USD/JPY pair.

USD/JPY daily chart

Technical Analysis:

Spot prices found decent support near the 155.00 psychological mark earlier this week. The said handle comprises the 200-day Exponential Moving Average (EMA) and the 61.8% Fibonacci retracement level of the February-April upswing, which, in turn, should act as a key pivotal point. A convincing break below will be seen as a fresh trigger for the USD/JPY bears and pave the way for deeper losses.

Meanwhile, the Relative Strength Index (RSI) is slipping toward 40, and the Moving Average Convergence Divergence (MACD) is below zero with a negative latest reading. Momentum indicators, in turn, hint that upside traction is softening after the recent pullback from the cycle highs.

In the meantime, immediate support aligns at the 50% Fibonacci retracement at 156.43, followed by the 155.00 confluence, with deeper layers at 154.00 and 152.18. On the topside, initial resistance is located at the 38.2% retracement at 157.43, ahead of the 23.6% level at 158.67. A sustained break above the 160.68 swing high would be needed to reopen the broader bullish trend.

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