USD/JPY slides below 159.00 as Iran peace hopes weigh on the US Dollar
- The White House signaled willingness to halt Iran operations, triggering a broad US Dollar sell-off across major pairs.
- The BoJ's hawkish March Summary of Opinions floated the prospect of a larger-than-usual rate hike if conditions hold.
- USD/JPY fell 0.62% on Tuesday, extending its decline for a second straight session as the pair slid below 159.00 on broad US Dollar weakness.
USD/JPY fell 0.62% on Tuesday, its second consecutive decline, closing around 158.70 after an early push toward 160.00 was firmly rejected. The sell-off dragged the pair below 159.00 for the first time in over a week, and Tuesday's candle printed a long upper wick with a close near the session lows, pointing to sustained selling pressure near the recent cycle highs close to 160.50. The intraday reversal had a one-directional feel, with sellers in control from the early Asian session through the New York close.
The decline was driven by a surge in risk appetite after reports that the White House is prepared to halt military operations against Iran, undermining the safe-haven bid that had supported the US Dollar through much of March. The S&P 500 posted its best single-session gain since the conflict began, and Treasury yields eased as the flight-to-safety trade unwound. The Federal Reserve held the federal funds rate at 3.50% to 3.75% in March, and Wednesday brings a heavy US data slate with the ADP Employment Change (40K consensus), February retail sales (0.5% MoM consensus), and the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) (52.5 consensus) all due. Friday's Non-Farm Payrolls (NFP) report (60K consensus) lands on Good Friday, when thin holiday liquidity could amplify any surprise.
On the Japanese Yen side, the Bank of Japan's (BoJ) March Summary of Opinions, released Monday, struck a hawkish tone, with one board member floating the possibility of a larger-than-usual rate hike if economic conditions hold, reinforcing expectations that the next move from 0.75% will be upward. Monday's Tokyo Consumer Price Index (CPI) for March cooled to 1.4% YoY from 1.5%, with the core reading (excluding fresh food) easing to 1.7% versus 1.8% expected, taking some immediate urgency off the tightening timeline. However, a tighter-than-expected unemployment rate of 2.6% versus 2.7% consensus kept the labor market picture supportive for the Yen.
USD/JPY 5-minute chart
Technical Analysis
In the 5-minute chart, USD/JPY trades at 158.82. The pair holds a bearish near-term bias as prices remain capped well below the descending 200-period exponential moving average near 159.20, confirming downside pressure from the intraday trend context. However, the latest rebound in the Stochastic RSI from oversold territory toward the upper band signals recovering momentum, suggesting that the recent slide from the 159.80 area is losing strength and that short-term corrective bounces may extend while below the broader bearish trend line implied by the long EMA.
Initial resistance emerges at 159.00, where earlier congestion aligns with the proximity of the declining intraday average, followed by a stronger cap at 159.20, the current 200-period EMA region that defines the upper boundary for any recovery attempt. A break above 159.20 would open the way toward 159.50, but failure to clear this cluster would keep sellers in control. On the downside, immediate support sits at 158.70, protecting the recent lows, with a break lower exposing 158.50 and then 158.20 as deeper bearish objectives if negative momentum resumes.
In the daily chart, USD/JPY trades at 158.82. The broader bias stays bullish as price holds well above the rising 50-day and 200-day exponential moving averages, confirming an entrenched uptrend despite the recent pullback from the 160.00 region. The Stochastic RSI has retreated from overbought extremes but remains in positive territory, signaling easing upside momentum rather than a clear reversal, which keeps dip-buying interest favored while the pair trades above short-term trend support.
Immediate support emerges at 158.00, where recent lows align with proximity to the 50-day EMA, and a break below this area would expose 157.00 as the next downside level within the broader bullish structure. Below that, 155.50 guards the path toward the 200-day EMA near 153.90, where medium-term buyers would be expected to defend the trend. On the topside, initial resistance sits near 160.00, the recent swing high, followed by 161.50 as the next upside objective if bullish momentum resumes.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Author
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
