USD/JPY steadied after a sharp fall on Thursday linked to intervention warnings from Tokyo. It traded near 156.61 after hitting 155.56, the lowest since 27 February, and was about 2.4% lower on the day.
The US Dollar Index was around 98.28, down nearly 0.68%. Middle East tensions were cited as a factor that could limit further US Dollar falls.
Reuters cited a Nikkei report, based on a government source, saying Japan may have bought Yen and sold Dollars on Thursday. There was no official confirmation, after Finance Minister Satsuki Katayama said officials were “getting closer to taking decisive steps”.
US GDP rose at an annualised 2% in Q1 2026, up from 0.5% and below the 2.3% forecast. The PCE price index rose 0.7% month on month in March, versus 0.4% in February, the strongest gain since June 2022, while core PCE rose 0.3% versus 0.4%.
Jerome Powell said policy is “well positioned” to wait and see as officials assess the US-Iran war. Traders are watching Tokyo headlines and the Strait of Hormuz, as high oil prices weigh on the Yen.
USD/JPY fell below the 50-day and 100-day SMAs, with RSI near the mid-30s and MACD negative. Resistance is near 157 and 158.56, while support is near 154.
We are seeing a significant move in USD/JPY after suspected government intervention, which traders must respect. This feels very similar to the playbook from April and May of 2024, when authorities spent nearly ¥10 trillion to defend the currency from similar highs. The sharp drop to the mid-155s shows that Japanese officials are serious about preventing further yen weakness.
This intervention creates a cap on the pair for now, making it risky to hold long positions above the 158 level. The warning from the Finance Minister about taking “decisive steps” was the final signal before this large move. For derivative traders, this means the risk of sudden, sharp downturns has dramatically increased.
On the other side of the trade, the US dollar remains fundamentally strong due to persistent inflation. The recent PCE data showing a 0.7% monthly jump confirms that the Federal Reserve has no reason to cut interest rates soon. We saw the Fed funds rate remain stuck above 4.5% all through 2025, and this core interest rate difference with Japan will continue to put upward pressure on the pair.
Geopolitical risks from the ongoing US-Iran conflict are also supporting the dollar as a safe-haven asset. With WTI crude oil prices pushing above $95 a barrel on news of shipping disruptions near the Strait of Hormuz, Japan’s energy import costs will rise. This is a negative for the yen, creating a difficult tug-of-war for the currency.
Given this sudden spike in volatility, traders should look at options to manage risk and express a view. The implied volatility for USD/JPY options has likely surged, but buying puts could be a straightforward way to position for another leg down if Japan intervenes again. This strategy offers a defined risk if the pair unexpectedly reverses higher.
Alternatively, selling out-of-the-money call options with strike prices above the 158.50 resistance level could be an effective strategy. This allows traders to collect premium by betting that Japanese authorities will successfully defend that area in the coming weeks. The clear technical resistance at the 50-day moving average reinforces this level as a strong ceiling.
The technical picture has turned bearish in the short term, with the pair breaking below both its 50-day and 100-day moving averages. This shift in momentum suggests the path of least resistance is now lower. The next major support level we are watching is the 200-day moving average down near the 154 mark.
