paused briefly midweek after a string of solid gains, currently trading at 157.59. The Japanese currency remains under pressure from a strengthening US dollar amid concerns that a prolonged conflict in the Middle East could keep energy prices elevated and increase inflation risks.
The market has also revised its expectations for Federal Reserve rate cuts, shifting the likelihood of a cut from July to September. Amid rising geopolitical tensions, the dollar has emerged as a safe haven asset, particularly as the US-Israeli military operation against Iran enters its fifth phase.
US President Donald Trump suggested the attacks could lead to a shift in power in Iran. However, any new regime could prove equally problematic, underscoring the uncertainty surrounding the outcome of the conflict.
Japanese Finance Minister Satsuki Katayama reiterated that monetary interventions remain a potential tool to support the yen. In his words, the authorities are extremely urgently monitoring the dynamics of the exchange rate and coordinating their actions with the US.
technical analysis
On the H4 USD/JPY chart, the market is forming a consolidation range around 157.00, which currently extends to 157.92. Today a decline is expected to test the 157.00 level from above. After this, potential growth towards 158.06 is likely. Technically, this scenario is supported by the MACD indicator, whose signal line lies well above the zero line and points firmly downwards.
On the H1 chart, USD/JPY is forming a descending wave pattern, targeting the 157.00 level, with a possible extension to 156.66, and further growth towards 158.38 is anticipated thereafter. Technically, this scenario is confirmed by the stochastic oscillator, with its signal line above the 20 level and pointing firmly downwards.
Conclusion
The brief USD/JPY consolidation appears temporary, and the broader trend favors a further rise in the dollar. Geopolitical tensions in the Middle East have reinforced the dollar's safe-haven status, pushing back expectations of Fed rate cuts and creating a favorable backdrop for the pair. Despite warnings of verbal intervention from Japanese officials, the technical outlook suggests that USD/JPY is poised to resume its upward trajectory once the current correction runs its course.
By RoboForex Analysis Department
Disclaimer:
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
