rose to 159.39 on Thursday, as the yen weakened amid mixed signals from Donald Trump about a possible de-escalation of the Middle East conflict. The situation continues to support the US dollar while weighing on the yen.
The US currency strengthened following reports that the operation in Iran is “close to completion” and could achieve its objectives in the coming weeks. However, these statements were accompanied by warnings about a possible escalation of hostilities. At the same time, Trump emphasized that diplomatic contacts are ongoing, keeping investors cautious and maintaining heightened attention to geopolitical risks.
For Japan, the situation remains delicate: the country relies heavily on oil imports from the Middle East and fuel prices reached record levels in March, although they have since fallen slightly, supported by government subsidies.
The Bank of Japan's new board member, Toichiro Asada, has expressed his preference for a cautious, data-driven approach. He joins the board ahead of the April 27-28 meeting, where markets are currently pricing in a roughly 70% chance of a rate hike.
Technical analysis
On the H4 chart, USD/JPY is forming a consolidation range around 159.10. The range is expected to widen to 159.50 today, followed by a drop to 157.70. A bullish breakout could lead to a correction to 160.40, after which a new bearish momentum is anticipated to 157.70, with the prospect of a continued move towards 156.00. The MACD indicator confirms this scenario, with its signal line below zero and pointing firmly downwards, supporting the possibility of the downtrend continuing.
According to the H1 chart, the market is forming a breakout towards 159.50 and is likely to hit the target today. After this, a downward wave is possible to 157.70 (testing from below). The stochastic oscillator confirms this structure, with its signal line above 80 and pointing firmly downwards, indicating continued short-term bearish potential.
Conclusion
USD/JPY remains in positive territory, with mixed signals from the US on easing tension in the Middle East creating an uncertain backdrop that favors the dollar against the yen. While reports of progress in the Iran operation have supported the dollar, ongoing diplomatic contacts and warnings of escalation keep markets on edge.
Japan's sensitivity to oil price fluctuations increases pressure on the yen, although government subsidies provide partial relief. With a new BoJ board member advocating a cautious approach and markets pricing in a 70% chance of a rate hike at the April meeting, the yen's near-term path will likely depend on both geopolitical developments and upcoming policy cues from Tokyo. Technical indicators point to a possible downward correction in the short term.
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.
