25.05.202612:37 Analisis Forex & Kajian: USD/JPY: analysis and outlook. Hormuz risks continue to weigh on yen

At the start of the new week, the USD/JPY pair has drawn buyers' attention after the formation of a bearish gap. In early European trade quotes have risen back toward the 159.00 area. Current prices remain close to the three-week high reached last Thursday and the pair appears poised for further gains against a backdrop of conflicting reports on prospects for a US-Iran deal.

Weekend developments have both lifted hopes of an agreement that could end the three-month confrontation with Iran — bolstering investor confidence — and simultaneously weakened the US dollar.

Disagreements between Washington and Tehran persist on key issues such as the blockade of the Strait of Hormuz and Iran's nuclear program. On Sunday President Donald Trump underlined the need for caution in concluding any accord with Iran, a stance that sustains geopolitical risk and tempers market optimism.

Market participants have already priced in at least one 25-basis-point rate increase by the Federal Reserve expected in early 2027, a factor that has helped prevent a deeper dollar sell-off.

Investors remain concerned about economic risks arising from ongoing disruptions to energy supplies. Those concerns are exerting downward pressure on the Japanese yen and have contributed to an intraday bounce in USD/JPY of roughly 30 pips. Speculation about potential currency intervention in Tokyo, however, may be deterring aggressive short positions against the yen.

Liquidity is likely to be reduced because of public holidays in the United States and in several European markets, calling for caution in trading decisions while the pair extends its advance. Nevertheless, the overall fundamental backdrop and the appearance of buyers using intraday dips suggest the path of least resistance for spot prices remains upward.

From a technical perspective, the pair has shown resilience around the 50-day simple moving average. It has not yet secured a firm close above the round 159.00 level, a breakthrough of which would clear the way toward the next round level at 160.00. Momentum oscillators are positive, indicating a bulls' advantage in the market. Accordingly, the path of least resistance for the pair is upward.