USD/JPY presses toward 160.00 as Crude Oil shock deepens Yen slide
- The Japanese Yen extended losses as the ongoing Strait of Hormuz disruption and wide rate gap keep pressure on the pair near intervention-sensitive territory.
- Tokyo is weighing unconventional measures, including possible intervention in oil futures markets, as surging energy prices drive yen weakness that traditional policy tools have failed to contain.
- Friday's University of Michigan consumer sentiment and inflation expectations data could shift the Fed rate outlook and set the tone heading into the April FOMC meeting.
USD/JPY edged up about 0.1% on Thursday, trading around 159.70 and holding just below the session high near 159.85. The pair has rallied sharply from the early-March lows close to 152.10, gaining roughly 770 pips in under three weeks. Thursday's candle is compact and sits near the top of the recent range, with price pressing against the 160.00 round number for the first time since the sell-off began in late January.
The ongoing US-Israeli conflict with Iran and the effective closure of the Strait of Hormuz continue to dominate the macro backdrop. Brent crude has averaged about $97 per barrel in March, up 33% from February, and the disruption to roughly 20% of global oil supply is hitting Japan harder than most; about 95% of the country's crude imports come from the Middle East. Reuters reported on Thursday that Japan's Finance Ministry is weighing a controversial plan to intervene in oil futures markets to arrest the Yen's slide, underscoring how far Tokyo has been pushed beyond its usual playbook. The Bank of Japan (BoJ) held rates at 0.75% at its March 19 meeting, but expectations for an April hike have firmed, with a Bloomberg survey showing 37% of economists now expect a move next month, up from 17% two months ago. Japanese two-year government bond yields climbed to their highest since 1996 on Thursday as markets price in a near-term rate increase.
On the US Dollar side, the Federal Reserve (Fed) held the federal funds rate at 3.50% to 3.75% at its March 18 meeting, with the updated dot plot still pointing to just one cut this year. Chair Powell noted inflation is not falling as quickly as hoped, with the Fed's core Personal Consumption Expenditures (PCE) forecast for 2026 revised up to 2.7%. Friday's University of Michigan (UoM) consumer sentiment and one-year inflation expectations readings will be closely watched; any upside surprise in inflation expectations would further cement the Fed's cautious stance and widen the rate differential that continues to weigh on the Yen.
USD/JPY five-minute chart
Technical Analysis
In the 5-minute chart, USD/JPY trades at 159.67. The near-term bias is mildly bullish as spot holds above the 200-period exponential moving average near 159.60, keeping intraday price action supported despite a shallow pullback from the 159.70 area. The Stochastic RSI eases from mid-range readings toward oversold territory, indicating fading upside momentum but not yet a decisive downside break, which aligns with a consolidative phase above the key average.
Immediate support emerges at 159.60, where the 200-period EMA underpins price, followed by 159.40 if sellers gain traction below the average. On the upside, initial resistance stands at 159.75, the recent intraday peak zone, with a break higher opening the way toward 160.00. The bias holds as long as USD/JPY trades above 159.60; a sustained move below this level would neutralize the short-term bullish setup and expose deeper downside toward 159.40.
In the daily chart, USD/JPY trades at 159.69. The near-term bias is bullish as price holds near recent highs well above the rising 50-day and 200-day exponential moving averages, which continue to confirm an established uptrend. Initial resistance emerges at 160.00, where psychological supply converges with the latest swing high zone, followed by 161.00 as the next upside reference if buyers extend control. On the downside, immediate support aligns near 158.50, with a deeper floor at 157.50 where the 50-day EMA begins to reinforce the structure. The Stochastic RSI has retreated from overbought territory but remains in positive territory, indicating that momentum is cooling rather than reversing while the broader bullish structure stays intact.
(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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