USD/JPY muted as easing Middle East tensions weigh on US Dollar

• Reports suggesting the US and Iran are moving closer to a deal eased fears of prolonged disruptions in the Strait of Hormuz.
• BoJ Minutes showed policymakers discussed the possibility of further rate hikes if energy-driven inflation persists.
• US Initial Jobless Claims rose to 200K from 190K but remained below expectations.

The USD/JPY pair is currently trading around the 156.40 level, showing minimal change throughout the day. This stability comes as multiple reports indicate that the United States (US) and Iran are moving closer to a deal to resolve the over two-month-long conflict.

Such developments are helping to alleviate concerns about prolonged disruptions in the Strait of Hormuz, which in turn is pushing Oil prices lower. This softer geopolitical outlook has negatively impacted the US Dollar (USD) while supporting the Japanese Yen (JPY).

In addition, the Minutes from the recent Bank of Japan (BoJ) meeting, released on Thursday, revealed that policymakers discussed the potential need for further interest rate hikes if the energy shock related to the Hormuz closure continues and drives inflation higher. Several board members expressed concern that persistently high Oil prices and a weakened Yen could compel the BoJ to tighten monetary policy, reinforcing expectations of a more hawkish stance from the central bank.

In the US, Initial Jobless Claims rose to 200K for the week ending May 2, up from the previous reading of 190K, but still below market expectations of 205K to 206K. Meanwhile, Continuing Claims declined to 1.766 million, indicating that layoffs remain historically low and the labor market remains relatively resilient.

Short-term technical analysis:

On the four-hour chart, USD/JPY trades at 156.26, maintaining a bearish near-term tone as the pair holds below both the 20-period Simple Moving Average (SMA) at 156.93 and the 100-period SMA at 158.53. The short-term SMA has rolled over below the longer one, hinting at a softening trend backdrop, while the Relative Strength Index (RSI) around 39 suggests lingering downside pressure but without oversold extremes, allowing room for further weakness if sellers regain control.

On the topside, initial resistance is located at 156.44, followed by a nearby barrier at 156.54, ahead of the 20-period SMA at 156.93 and the more distant 100-period SMA at 158.53. On the downside, immediate support is seen at 156.17, with a secondary floor at 156.04. A clear drop through this support band would reinforce the bearish bias and expose lower levels on the four-hour horizon.

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