USD/JPY drifts near 159.00 as ceasefire hopes and Tokyo warnings collide
- The BoJ's Tankan index for large manufacturers rose to 17, the highest since Q4 2021, despite the ongoing oil shock.
- ISM Prices Paid surged to 78.3, the highest since 2022, with the Fed still locked at 3.50% to 3.75%.
- Trump's primetime address on the Iran war and Thursday's jobless claims are the key risk events ahead of Easter.
USD/JPY closed next to flat on Wednesday, settling around 158.70 after a subdued session that followed two straight days of declines from the 160.40 area. The pair remains caught in congestion near 159.00, with price chopping between the recent swing high above 160.00 and support around 158.00. A cluster of mixed candle bodies on the four-hour chart reflects the tug of war between US Dollar strength and Yen safe-haven demand.
On the Japanese Yen side, the Bank of Japan's (BoJ) Tankan large manufacturers sentiment index rose to 17 in Q1 2026, the highest since Q4 2021, and the manufacturing Purchasing Managers Index (PMI) was revised up to 51.6 in March. However, the Yen's recent gains owe more to verbal intervention than data. Vice Finance Minister Atsushi Mimura warned earlier in the week that the government would "take decisive action" against speculative moves after the pair breached 160.00 on Monday, a level that triggered actual intervention in 2024. There is no meaningful Japanese economic data due for the rest of the week.
On the US Dollar side, Wednesday's data leaned hawkish. The Institute for Supply Management (ISM) Manufacturing Prices Paid component jumped to 78.3 from 70.5, the highest since 2022, while the headline PMI edged up to 52.7. Retail sales beat at 0.6% MoM and ADP Employment Change came in at 62K against a 40K consensus. The Federal Reserve (Fed) held rates at 3.50% to 3.75% in March, and St. Louis Fed President Musalem said on Wednesday that the current rate is likely appropriate "for some time." President Trump is set to address the nation on the war with Iran later Wednesday night, with markets watching for any signal on the Strait of Hormuz and the conflict timeline.
USD/JPY 4-hour chart
Technical Analysis
In the 4-hour chart, USD/JPY trades at 158.7900. The near-term bias is mildly bullish as price holds well above the rising 200-period exponential moving average near 158.10, keeping the broader uptrend intact despite recent consolidation. The latest candles show buyers defending dips above that dynamic support, while the Stochastic RSI has started to turn higher from oversold territory, hinting that downside pressure is fading and that a recovery attempt may be building within the prevailing trend.
Initial resistance is located at the recent swing high around 160.30, with a break there opening the way toward the 160.70 area next. On the downside, immediate support emerges near 158.60, ahead of the 158.10 region defined by the 200-period EMA, which is the key level to hold to preserve the current bullish structure. A sustained drop below 158.10 would undermine the upside bias and expose deeper losses toward 157.70.
(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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