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The Japanese yen strengthened to the 159.00 level against the US dollar, but bullish sentiment remains constrained due to risks in the Strait of Hormuz. The USD/JPY currency pair is expected to continue a moderate correction and is likely to decline amid mixed fundamental signals, although the downside potential is limited.
Despite setbacks in peace talks between the US and Iran over the past weekend, investors remain hopeful that diplomatic opportunities with Iran are not exhausted and that discussions may continue. US Vice President JD Vance noted that some progress has been made, although no breakthrough has yet occurred. This optimism undermines the US dollar and is one of the key factors putting pressure on the USD/JPY pair.
In addition, uncertainty regarding inflation risks and possible changes in Federal Reserve interest rates has pushed the dollar down to its March lows.
Data released on Friday showed that US inflation has risen at its fastest pace in the past four years. This has prompted investors to consider the possibility of interest rate hikes this year due to geopolitical tensions. Nevertheless, traders have not fully abandoned expectations of rate cuts.
At the same time, the Japanese yen may struggle to attract strong buying interest due to economic concerns related to potential external energy shocks caused by instability in the Strait of Hormuz. US President Donald Trump announced the start of a blockade of this strategically important waterway involving the US Navy and pledged to destroy Iranian military vessels approaching the area. In response, Iran issued threats against all ports in the Persian Gulf and the Gulf of Oman.
Given that Japan is heavily dependent on oil imports from the Middle East, ongoing uncertainty continues to fuel concerns that the economy may face significant pressure in the near future. This discourages traders from opening aggressive bullish positions in the yen and helps limit more significant losses for the USD/JPY pair. Nevertheless, expectations of intervention by Japanese authorities to prevent further yen weakening may cap gains in the pair.
From a technical perspective, the pair has found support at the 20-day SMA and the round level of 159.00. If this level fails to hold, prices may fall toward 158.35 and then to the April low near the round level of 158.00.
However, if prices hold above this level, the next target will be the round level of 160.00. It is also worth noting that oscillators on the daily chart are positive, giving bulls the advantage.
The table below shows the percentage change of the Japanese yen against major currencies today. The yen posted its strongest gains against the Australian dollar.
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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