USD/JPY holds onto light gain as Hormuz closure fuels safe-haven demand

The USD/JPY pair is trading with a neutral tone near 159.70 on Tuesday, up 0.27%, as markets react to a dramatic escalation in geopolitical tensions following headlines that the United States (US) has moved to effectively shut down traffic through the Strait of Hormuz.

On the one hand, the Japanese Yen (JPY) is capping upside in the US Dollar (USD) amid traditional safe-haven inflows as investors seek protection amid rising geopolitical uncertainty.

On the other hand, Japan’s heavy reliance on imported energy leaves it particularly exposed to a sustained spike in Oil prices.

Meanwhile, the USD is drawing strong support from multiple channels. Higher Oil prices are reinforcing expectations that inflation could remain sticky, potentially forcing the Federal Reserve (Fed) to maintain a cautious stance on rate cuts. At the same time, US Treasury yields and stocks are holding firm.

Short-term technical analysis:

On the four-hour chart, USD/JPY trades at 159.74, maintaining a constructive bullish bias as it holds above the 20-period and 100-period Simple Moving Averages (SMAs) at 159.09 and 159.26, respectively. The cluster of nearby horizontal levels at 159.73 and 159.57 underpins the pair, while the Relative Strength Index (RSI) nearing 62 leans to the bullish side without yet signaling overbought conditions.

On the downside, initial support is seen at the immediate pivot zone near 159.73, followed by 159.57 and 159.51, where recent buying interest has emerged, with the 100-period and 20-period SMAs reinforcing the broader floor. On the topside, the first hurdle is the recent horizontal resistance at 159.86, and a clear break above this barrier would open the way for a continuation of the uptrend in the near term.

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