During the Asian trading session on Friday, USD/JPY extended its rebound, with the exchange rate climbing to near 159.15. The US dollar is currently maintaining strength supported by safe-haven demand, while the Japanese yen remains under relative pressure due to policy uncertainty and energy-related factors.
Geopolitical tensions in the Middle East continue to be a core driver for the market. Although the US and Iran have reached a short-term arrangement to pause conflict, significant uncertainty remains regarding its implementation. The US has demanded that Iran restore navigation through the Strait of Hormuz, warning of potential further military action otherwise. This stance has heightened market concerns about an escalation of conflict, driving safe-haven flows into US dollar assets.
Simultaneously, restrictions on transport through the Strait of Hormuz are having a noticeable impact on global energy markets. Market estimates indicate this passage handles approximately 20% of global seaborne crude oil shipments. Its instability is directly pushing energy prices higher and reinforcing inflation expectations, thereby supporting the US dollar's performance.
Furthermore, additional negotiations between the US and Iran are scheduled for the weekend, but clear differences persist over ceasefire conditions, particularly regarding the scope of regional conflicts. This is keeping market risk appetite cautious, providing sustained support for the US dollar.
In Japan, the government plans to release strategic petroleum reserves equivalent to about 20 days of supply to alleviate energy supply pressures. This move highlights the impact of rising energy prices on the Japanese economy and, to some extent, weakens fundamental support for the yen.
However, expectations for Bank of Japan policy present a potential positive for the yen. Markets estimate a roughly 70% probability that the Bank of Japan could raise interest rates at its April meeting. If this policy shift materializes, it would help support the yen, thereby applying some downward pressure on USD/JPY.
On a macroeconomic level, the market is focused on the upcoming US Consumer Price Index data for March. Inflation is expected to rebound due to rising energy prices, with market forecasts anticipating a year-on-year increase of approximately 3.3%. If the data comes in higher than expected, it would further reinforce the Federal Reserve's stance of maintaining high interest rates, potentially driving the dollar stronger. Conversely, weaker data could trigger a dollar correction.
From a technical perspective, the daily chart structure shows USD/JPY maintaining a strong upward trend. The exchange rate continues to trade within an ascending channel and is currently approaching the key psychological level of 160, indicating that bullish momentum remains dominant. The 158.00 area constitutes near-term support; a break below this level could trigger a technical correction. The 160.00 level is a key psychological resistance; a break above could open further upside potential. Momentum indicators show the RSI at elevated levels but without significant divergence, while the MACD remains above zero, suggesting the trend is still bullish.
On the 4-hour chart, USD/JPY shows a structure of oscillating upward movement. The price is moving along a short-term ascending trendline, with the moving average system maintaining a bullish alignment. The RSI is holding near 60, indicating bullish control, and the MACD remains in positive territory with stable momentum. In the short term, if the exchange rate stabilizes above 159, it could continue testing the 160 level. Should a pullback occur, the 158.50–158.00 area is expected to provide support.
The current USD/JPY movement is driven by a combination of safe-haven demand for the US dollar and divergent policy expectations. Uncertainty in the Middle East supports the dollar, while potential Bank of Japan rate hike expectations provide support for the yen, creating a landscape of competing forces. In the near term, the US CPI data will be a key variable determining the dollar's strength and the direction of the exchange rate. Barring significant changes in fundamentals, USD/JPY is likely to maintain a pattern of trading strong within a high range.
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