USD/JPY Price Forecast: Recovers from 20-day EMA as US Dollar’s safe-haven demand revives
- USD/JPY bounces back to near 159.50 after a two-day correction.
- Trump’s threats of extreme hits on Iran have revived risks that the Middle East war will last long.
- Upbeat US private employment and ISM Manufacturing PMI data have also strengthened the US Dollar.
The USD/JPY pair is up 0.4% to near 159.50 in the early European trade on Thursday. The pair recovers strongly after a two-day corrective move as the safe-haven demand of the US Dollar (USD) has revived, following threats that the United States (US) will hit Iran extremely hard in the coming weeks.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is up 0.5% to near 100.00.
US President Donald Trump said in a planned speech earlier in the day, “We are going to hit them extremely hard over next two to three weeks, and bring them back to the stone ages.” Trump also threatened to attack Iran’s electricity infrastructure if it doesn’t accept a deal.
In addition to Middle East conflicts, upbeat US ADP Employment Change and ISM Manufacturing PMI data for March have also offered support to the US Dollar.
Though investors have underpinned the US Dollar against the Japanese Yen (JPY), the latter trades higher against its other peers, as its safe-haven demand has also improved amid fears that the Iran conflict will last long.
USD/JPY technical analysis
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USD/JPY gains sharply to near 159.33 during the day. The near-term bias stays bullish as price holds well above the 20-day Exponential Moving Average (EMA) near 158.70 and continues to respect the ascending parallel channel in place since mid-March.
The 14-day Relative Strength Index (RSI) around 56 keeps momentum on the positive side, indicating that dips within the channel remain supported rather than signaling a completed top.
Immediate support emerges around 159.00, ahead of the channel floor clustered near 158.20. A break below this area would expose the next support around 157.40, where the prior consolidation base aligns with the channel projection. On the topside, initial resistance stands at 159.80, followed by the channel cap around 160.70. A daily close above 160.70 would confirm a fresh upside extension toward the 161.50 region, while failure below 159.80 keeps USD/JPY confined to a consolidation phase inside the broader uptrend.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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