USD/JPY rebounds from lows as Iran ceasefire optimism wavers ahead of NFP

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USD/JPY recovered close to 156.90 on Thursday, edging up roughly 0.4% from Wednesday's slide to 155.04, the lowest level since early February.

USD/JPY found a foothold on Wednesday on wavering US-Iran de-escalation hopes and renewed speculation of Japanese intervention.
Friday's US Nonfarm Payrolls report is the next major test for the Greenback amid a busy slate of Fed speakers.

USD/JPY recovered close to 156.90 on Thursday, edging up roughly 0.4% from Wednesday's slide to 155.04, the lowest level since early February. The plunge tore through the late-April peak near 160.70 and the consolidation that followed, leaving a series of long-bodied bearish candles before the pair stabilized between 156 and 157.50 in recent sessions.

The dominant macro backdrop for the US Dollar (USD) remains the US-Iran ceasefire and the situation around the Strait of Hormuz. Wednesday's slide for the Greenback came as the White House signaled progress toward a memorandum of understanding with Tehran, while President Trump announced a temporary pause in US efforts to assist stranded vessels exiting the strait to allow time for renewed talks. That narrative dragged oil prices lower and pulled the Dollar Index back toward 98, though Thursday's modest USD bounce points to caution as the optimism trade unwinds. Friday's US Nonfarm Payrolls (NFP) print is the next major catalyst, with consensus close to 62K against a prior 178K.

For the Japanese Yen (JPY), traders are continuing to position around suspected Bank of Japan (BoJ) intervention, with reports of Japan's Ministry of Finance stepping in on multiple occasions over the past week after the Dollar peaked above 160.00. Tokyo's stance has been broadly framed as defending against disorderly moves rather than targeting a specific level, but the combination of intervention risk, softer oil and an easing geopolitical premium has pushed USD/JPY back toward pre-conflict ranges.

USD/JPY 4-hour chart

Technical Analysis

In the four-hour chart, USD/JPY trades at 156.93. The pair remains under clear bearish pressure in the near term, holding well below the 200-period Exponential Moving Average (EMA) at 158.35, which suggests rallies are still capped by medium-term trend resistance. The Stochastic RSI has cooled back toward the mid-50s, hinting at fading downside momentum but not yet signaling a decisive bullish reversal while price action stays beneath this EMA barrier.

On the topside, immediate resistance is defined by the 200-period EMA at 158.35, and a sustained break above this level would be needed to ease the current bearish bias and open the way for a more meaningful recovery. With no nearby technical supports highlighted by moving averages or oscillators on this timeframe, traders may look to recent swing lows and intraday price reactions for interim demand zones, while the prevailing setup continues to favor selling into strength below 158.35.

(The technical analysis of this story was written with the help of an AI tool.)

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.