During the Asian trading session on Wednesday, the USD/JPY pair continued its corrective decline, moving down to around 157.65. A weakening US dollar served as a primary driver, largely due to signs of a temporary easing in Middle East tensions, which improved market risk sentiment and reduced the dollar's safe-haven appeal. Previously, the United States indicated it would pause certain actions to observe if progress toward an agreement could be made, a statement that helped alleviate market anxiety.
Against the backdrop of improved risk appetite, the Japanese yen, a traditional safe-haven currency, also gained some support. Additionally, policy signals from Japan significantly influenced the exchange rate. Market expectations for potential further intervention by Japanese authorities continued to build.
Market analysts suggest that a new round of intervention may be necessary to significantly depress the US dollar. Rising intervention expectations have made market participants cautious about the upside potential for USD/JPY and increased short-term volatility. Investors are becoming more prudent with their positions at elevated levels, limiting the pair's rebound potential.
Simultaneously, market focus is gradually shifting to upcoming US employment data. The ADP employment report and the subsequent Non-Farm Payrolls data will provide crucial insights into the health of the US economy. The market generally anticipates that the US added approximately 60,000 jobs in April, with the unemployment rate holding steady around 4.3%. The performance of the employment data will directly influence market judgments regarding the future path of interest rates, thereby impacting the US dollar's trajectory.
From a technical perspective, the daily chart for USD/JPY shows signs of a pullback from recent highs. The pair has retreated from its prior peak, and short-term moving averages are beginning to flatten, indicating weakening upward momentum. The current price is near 157.50, with resistance levels observed around 158.50 and the 160.00 area. Support levels are situated near 156.50 and 155.00. The RSI indicator has retreated from overbought territory to neutral levels, and the MACD has formed a bearish crossover, suggesting increased short-term adjustment pressure, although the overall trend has not yet turned fully bearish.
On the 4-hour chart, the pair exhibits a oscillating downward structure. Short-term moving averages have turned downward, and the price is trading below these averages, indicating dominant bearish momentum. The MACD continues to operate below the zero line, while the RSI remains near 40, reflecting a weak technical posture. A break below the 156.50 support level could lead to a further decline toward the 155.00 area. Conversely, if the pair rebounds and breaks above 158.50, it may attempt to retest the 160.00 level.
The current movement of USD/JPY is influenced by multiple factors. On one hand, the easing of Middle East tensions has reduced demand for the US dollar as a safe haven. On the other hand, expectations of intervention by Japanese authorities are exerting downward pressure on the exchange rate. Policy expectations and macroeconomic data are key variables driving short-term price action. Going forward, close attention should be paid to the performance of US employment data and policy developments in Japan, as the pair is likely to maintain a high-volatility, range-bound pattern.
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