• USD/JPY attracts some follow-through buyers on Tuesday, though it lacks bullish conviction.
• Japan’s soft Household Spending further tempered BoJ rate hike bets and undermined the JPY.
• Intervention fears help limit JPY losses and might cap the pair amid subdued USD demand.

The USD/JPY pair touches a one-week high during the Asian session on Tuesday, though it lacks follow-through and remains below the 160.00 psychological mark amid mixed fundamental cues.

Data released by Japan's Ministry of Internal Affairs showed that Household Spending fell 1.8% from a year earlier in February, deepening from a 1.0% decline in the previous month and marking the third consecutive month of decrease. On a monthly basis, personal spending increased for the first time in three months, by 1.5%, reversing a part of the 2.5% fall in January but missing consensus estimates. This, in turn, undermines the Japanese Yen (JPY) and acts as a tailwind for the USD/JPY pair.

Meanwhile, the ongoing war in Iran has been fueling concerns that Japan's economy will come under substantial strain in the foreseeable future against the backdrop of its dependence on oil imports from the Middle East. This further tempers bets for an immediate rate hike by the Bank of Japan (BoJ) and turns out to be another factor weighing on the JPY. However, speculations that authorities would step in to stem further weakness in the domestic currency help limit deeper losses for the JPY.

On the geopolitical front, Iran rejected a potential ceasefire proposal to end its conflict with the US, while US President Donald Trump threatened stronger action if the country fails to reopen the critical Strait of Hormuz. This, along with expectations that elevated energy prices would rekindle inflationary pressures and force the US Federal Reserve (Fed) to adopt a more hawkish stance, benefits the US Dollar's (USD) global reserve currency status and further offers some support to the USD/JPY pair.

Traders now look forward to the release of US Durable Goods Orders for some impetus later during the North American session. The focus, however, will remain glued to developments surrounding the US-Iran war amid fading de-escalation hopes and ahead of Trump's deadline. Meanwhile, the aforementioned fundamental backdrop suggests that the path of least resistance for the USD/JPY pair remains to the upside and backs the case for an extension of the move up from mid-February lows.