USD/JPY tests 158.00 as ceasefire saps safe-haven demand

USD/JPY slipped roughly 0.66% on Wednesday after the US and Iran struck a last-minute ceasefire deal, pulling the pair off the 160.00 handle.
Japanese economic data is functionally absent for the rest of the week, leaving Thursday's US PCE and Friday's CPI to set the tone.

Joshua Gibson FXStreet

USD/JPY fell around 0.66% on Wednesday, retreating from the session high near 160.00 to settle close to 158.50. The sharp reversal from the 160.00 level, which has only been tested once since Tokyo's intervention campaign in July 2024, produced a series of lower highs on the intraday chart, with price consolidating in a tight band just below the 15-minute 200-period EMA heading into the Asian open.

The selloff was triggered by news of a two-week ceasefire between the US and Iran, including an agreement by Tehran to reopen the Strait of Hormuz. The deal immediately crushed the safe-haven bid that had propelled the US Dollar and crude oil higher throughout March, dragging USD/JPY sharply lower as the Yen clawed back losses.

However, the ceasefire is already proving tenuous; neither side has committed to the underlying 10-point framework, and traders are treating the two-week window as a countdown rather than a resolution.

On the Japanese Yen side, the domestic calendar offers little through Friday. The Bank of Japan (BoJ) is widely expected to hike at its April 28 meeting, with markets pricing roughly a 70% probability of an increase, but the decision is still weeks away. Attention therefore shifts entirely to the US: Thursday brings the core Personal Consumption Expenditures (PCE) Price Index for February alongside fourth-quarter Gross Domestic Product (GDP) data, while Friday delivers March Consumer Price Index (CPI) figures and the University of Michigan (UoM) consumer sentiment and inflation expectations surveys.

USD/JPY 15-minute chart

Technical Analysis

In the fifteen-minute chart, USD/JPY trades at 158.57, maintaining a bearish near-term tone as it holds beneath the 200-period Exponential Moving Average (EMA) at 158.92. The pair’s latest slide has left price clearly capped by this medium-term dynamic barrier, while the Stochastic RSI has dropped into oversold territory near 14, hinting that downside momentum is stretched but not yet reversed.

On the topside, initial resistance is located at the 200-period EMA around 158.92, and a sustained break above this level would be needed to ease immediate selling pressure and allow a recovery toward higher intraday levels. With no clear nearby structural supports on the chart, any further decline from current levels would likely rely on fresh price discovery to establish a new floor, although the oversold Stochastic RSI suggests that sellers may become more cautious on deeper dips.

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

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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.

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