Japanese Yen surges amid hawkish BoJ

USD/JPY trades sharply lower near the 159.50 area on Friday as the Japanese Yen (JPY) strengthens following intervention by Japanese authorities and a relatively hawkish Bank of Japan (BoJ) policy announcement.

Japan reportedly entered the foreign-exchange market to purchase Yen and sell US Dollars after USD/JPY in recent weeks climbed to multi-decade highs. The intervention triggered an abrupt decline in the pair, although price action remains extremely volatile as investors assess whether officials will continue defending the currency.

The BoJ left its short-term interest rate unchanged at 1.00%, as widely anticipated. The decision was approved by an 8–1 majority, with board member Hajime Takata voting to raise the rate to 1.25% due to increasing upside risks to inflation from overseas demand shocks and changes in global financial conditions.

Despite maintaining rates, the Japanese central bank reiterated that it would continue raising borrowing costs if economic activity, inflation and financial conditions evolve in line with its projections. BoJ Governor Kazuo Ueda also indicated that the central bank could accelerate the pace of rate increases and would avoid falling behind the inflation curve, providing additional support to the Yen.

Geopolitical developments provide mixed signals for the US Dollar. United States (US) President Donald Trump announced an agreement intended to secure the phased disarmament of Hamas and the eventual withdrawal of Israeli forces from Gaza. The development could reduce some safe-haven demand for the Greenback, although implementation remains conditional on commitments from the parties involved.

However, tensions surrounding Iran remain elevated. Kuwait said its air defenses intercepted Iranian drones targeting military and vital installations, while Trump stated that the war was progressing well and that the United States was “hitting Iran hard.”

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 159.12, maintaining a bearish near-term bias as price holds well below the 20-period and 100-period Simple Moving Averages (SMAs) clustered around 162.31 and 162.62. The pair remains capped by a band of overhead horizontal resistance beginning at 159.92 and reinforced at 160.57, while the Relative Strength Index (RSI) near 25 hovers in oversold territory, hinting that downside momentum is stretched but not yet reversed.

On the topside, initial resistance appears at 159.92, with a stronger barrier at 160.57. Above these levels, the 20-period and 100-period MAs around 162.31 and 162.62, respectively, form a broader supply zone that would need to be reclaimed to ease the prevailing bearish tone. On the downside, immediate support is seen at 158.91, with a secondary floor at 158.56, and a clear break beneath this cluster would expose the pair to further declines in line with the dominant downtrend.

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