The USD/JPY pair increased to 159.29 on Friday, indicating one of the lowest points for the Japanese yen since July 2024. The depreciation of the yen is intensifying apprehensions within the market regarding the potential for intervention by regulatory bodies in the foreign exchange arena. Bank of Japan Governor Kazuo Ueda cautioned that a depreciating yen may intensify imported inflation in the context of increasing oil prices. He suggests that this could expedite the Bank of Japan’s shift towards normalizing its monetary policy.
Ueda highlighted that the influence of exchange rate fluctuations on inflation has become more significant than before, thereby elevating their importance in policy decision-making. Oil prices experienced a significant increase after Iran’s new Supreme Leader, Mojtaba Khamenei, committed to upholding the effective closure of the Strait of Hormuz. Tehran is escalating its assaults on oil and transportation infrastructure throughout the region. The Middle East conflict shows no indications of de-escalation. The strong statements from both Tehran and Washington suggest that the ongoing confrontation with Iran is still unresolved as it moves into its second week.
On the H4 USD/JPY chart, the market is establishing a consolidation range centered around 159.12, presently extending to 159.60. A pullback to test 159.20 from above is anticipated today, potentially leading to a subsequent upward movement towards 159.88. This scenario is validated by the MACD indicator, with its signal line positioned well above zero and trending decisively upwards. On the H1 chart, USD/JPY is developing a growth wave aimed at 159.88, with a potential extension to 160.00. A downward correction is anticipated, targeting a minimum of 158.55. This scenario is technically validated by the Stochastic oscillator, which shows its signal line positioned above 80 and maintaining an upward trajectory.
The USD/JPY pair has reached multi-month highs, influenced by a declining yen, which is propelled by increasing oil prices and shifting expectations regarding Bank of Japan policy. Governor Ueda’s comments indicate that a decline in currency strength could hasten the Bank’s policy normalization, while speculation regarding potential intervention is on the rise. Given the ongoing geopolitical tensions in the Middle East and the technical indicators suggesting potential near-term gains, the pair seems ready to approach the important 160.00 level. Nonetheless, verbal warnings from Japanese officials may heighten volatility.