USD/JPY traded near 159.20, rising about 100 pips from its intraday low and showing modest daily gains. Price action was linked to ongoing Middle East developments and changing expectations for central bank policy.
The US Dollar stayed supported by safe-haven demand amid tensions involving Iran and uncertainty around the Strait of Hormuz. Reports from Qatari Al-Araby TV said US President Donald Trump told Lebanon’s President Aoun that a ceasefire would be announced within hours.
The Japanese Yen struggled to gain traction as the Bank of Japan kept a gradual approach to normalising policy. Officials reiterated a cautious, data-dependent stance and a focus on sustainable inflation.
On the four-hour chart, USD/JPY traded at 159.15 with a neutral near-term bias. It consolidated just below the 100-period SMA at 159.29, while the 20-period SMA stood at 159.06.
The RSI was 53, pointing to mild upward momentum without overbought conditions. Resistance was near 159.29 and 159.30, while support levels were 159.15, 158.94, and 158.85.
The key driver remains the policy gap between the Federal Reserve and the Bank of Japan. The recent US inflation report for March 2026 came in at a firm 3.1%, supporting the view that the Fed will not be cutting rates soon. This starkly contrasts with the Bank of Japan’s gradual approach, creating a powerful tailwind for USD/JPY.
Geopolitical risks are keeping the US dollar in demand as a safe haven. We see this reflected in energy markets, where persistent concerns over shipping in the Strait of Hormuz have helped push crude oil prices above $95 a barrel. This underlying tension continues to make traders favor the security of the dollar.
However, we must watch the 160 level very closely for potential intervention by Japanese authorities. Looking back at history, we saw finance ministry officials step into the market to strengthen the yen several times during 2024 as the rate approached these same heights. The risk of a sudden, sharp reversal orchestrated by officials is now extremely high.
This presents an opportunity for traders to use options to play the expected volatility. Given the tension between the strong upward trend and the imminent intervention threat, buying long-dated straddles could be a viable strategy. This allows us to profit from a large price move in either direction, whether it’s a breakout higher or a sharp drop from intervention.
For now, the pair is coiling in a tight range, with key resistance around 159.30 and initial support near 159.00. We are watching for a decisive break of this consolidation zone to signal the next major move. The current stability suggests pressure is building for a significant move in the coming weeks.
