USD/JPY fades from near 160.00 as improving sentiment softens the US Dollar
- The BoJ held rates at 0.75% in March, but growing speculation points to an April hike as inflation pressures build.
- Markets grew more hopeful of an Iran resolution despite constant moving of the goalposts on a peace deal.
- Tuesday's US PPI and a barrage of Fed speeches could shape near-term rate expectations.
USD/JPY traded in a wide intraday range on Monday, briefly spiking to a session high near 159.86 before pulling back steadily to settle around 159.35, roughly flat on the day. The pair opened the week on the high end but gave back gains through the session as sellers emerged below the 160.00 handle. Since the beginning of April, the pair has been oscillating in a roughly 200-pip band between about 158.00 and 160.00, with the psychologically significant 160.00 level continuing to cap rallies.
Speculation around an April rate increase from the Bank of Japan (BoJ) is building, with a former BoJ executive director recently arguing the central bank risks falling behind on inflation if it does not act at the April 27 to 28 meeting. Japan's sensitivity to the Middle East conflict is acute: the country imports nearly all of its Crude Oil, and the effective closure of the Strait of Hormuz since late February has driven energy costs sharply higher, complicating the BoJ's balancing act between inflation risks and growth concerns. Economy Minister Ryosei Akazawa added to the policy debate last week by noting that the BoJ's monetary policy could be used as a tool to curb inflation through a stronger Yen.
The US Dollar weakened broadly on Monday as risk sentiment improved, with markets growing increasingly hopeful that the Iran conflict will eventually reach a resolution despite constant moving of the goalposts on a peace deal. Tuesday brings a key inflation print in the March Producer Price Index (PPI), which is expected to show headline PPI rising 1.2% MoM, up sharply from 0.7% in February, with the YoY reading forecast to jump to 4.6% from 3.4%. The data will capture the opening stages of increased energy costs from the Iran conflict, while five Fed speeches from Goolsbee, Barr, Barkin, Collins, and Paulson round out a busy session heading into the April 28 to 29 Federal Open Market Committee (FOMC) meeting.
USD/JPY 5-minute chart
Technical Analysis
In the five-minute chart, USD/JPY trades at 159.35. The pair holds in negative territory below the day’s open at 159.73, keeping the near-term tone bearish as intraday price action tracks a mild pullback from earlier levels. The Stochastic RSI has retreated from overbought readings near 90 to the high-30s, hinting that bullish momentum has faded and that buyers are losing control in the very short term.
On the topside, initial resistance is located at the day’s open around 159.73, and a recovery above this hurdle would be needed to ease immediate downside pressure and signal scope for a broader intraday rebound. With no nearby technical supports from moving averages or other structural levels in this dataset, a sustained failure to reclaim 159.73 leaves USD/JPY vulnerable to further softening on the five-minute horizon, with traders likely to watch for fresh price-derived floors on subsequent dips.
In the four-hour chart, USD/JPY trades at 159.36, holding a clear bullish bias as price extends above the 200-period exponential moving average (EMA) at 158.51. The pair is consolidating near recent highs rather than retracing toward the average, and the Stochastic RSI at 74.46 sits in overbought territory, hinting that while upside momentum remains firm, the risk of a corrective pause or shallow pullback is rising.
On the downside, initial support is seen at the 159.36 area as an immediate intraday floor, followed by stronger structural support at the 200-period EMA around 158.51, where dip-buying interest could re-emerge if a deeper retracement unfolds. Absent any clearly defined resistance levels from the current setup, traders will likely use recent swing highs as reference points, while the broader uptrend is expected to stay intact as long as USD/JPY holds above the 200-period EMA.
(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.
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