The yen strengthened sharply on Friday as the US dollar weakened, driving USD/JPY down 0.61% to around 158.18 and setting the pair on course for a third straight weekly decline. The move followed a steep plunge in global oil prices after Iran temporarily reopened the Strait of Hormuz, easing immediate fears of a major energy supply shock.
Dollar under pressure as oil drops and peace hopes rise
USD/JPY has been confined to a one‑month range between 157.50 and 160.50, trading broadly in line with the US Dollar Index (DXY), which fell about 0.5% to below 98, its weakest level since regional tensions escalated earlier this year.
The pullback in the dollar comes amid optimism over US–Iran peace discussions and a shift in expectations for future interest rate differentials. Market pricing now reflects nearly even odds of a 25 basis point Federal Reserve rate cut by year‑end, while the Bank of Japan is still seen moving cautiously on policy normalization.
Oil plunges after Iran move on strait of hormuz
Crude prices tumbled more than 10% after Tehran announced a temporary reopening of the Strait of Hormuz, a critical chokepoint for global energy flows.
Brent crude, the international benchmark, slumped over 10% to $88.8 a barrel, down sharply from a peak near $119 last month. US benchmark West Texas Intermediate (WTI) fell below $87 a barrel in parallel.
Iranian Foreign Minister Abbas Araghchi said that, under the current truce in Lebanon, commercial shipping through the Strait is permitted for the remainder of the 10‑day ceasefire. Vessels must follow coordinated maritime routes overseen by Iran’s Ports and Maritime Organisation.
The reopening is explicitly tied to the temporary ceasefire and comes with strict routing conditions under Iranian supervision. While President Donald Trump publicly thanked Iran for the move, he said the US naval blockade on Iran would remain in place until a broader agreement is reached, particularly on nuclear issues.
Inflation outlook cools, fed cut odds rise
The sudden fall in oil prices has eased short‑term inflation risks, prompting traders to increase bets on future Fed rate cuts. Softer energy prices are feeding into lower global inflation forecasts and reinforcing the view that US policy could tilt more dovish later this year.
This stands in contrast to the Bank of Japan. Governor Kazuo Ueda has recently avoided giving any clear signal of imminent rate hikes, citing the difficulty of setting policy amid heightened geopolitical uncertainty. The evolving interest rate outlook is pressuring the dollar and lending support to the yen.
Yen outperforms major peers
Currency data showed broad yen strength heading into the weekend. The Japanese currency gained:
- 0.62% against the US dollar
- 0.52% versus the euro
- 0.45% against the British pound
The performance underscores a general bid for the yen amid shifting rate expectations and easing energy‑related risk.
Technical picture: downside risks for USD/JPY
From a technical standpoint, USD/JPY is trading below its 20‑day simple moving average (SMA) near 159.20, maintaining a bearish near‑term bias.
Key levels include:
- Support:
- 158.15: immediate floor. A daily close below this area would signal building downside momentum and open the door to deeper losses toward earlier price lows.
- Resistance:
- 159.20: 20‑day SMA and midline of the Bollinger Bands, acting as initial resistance.
- 160.25: next resistance zone, where selling pressure could re‑emerge if the pair rebounds.
Momentum indicators point to further potential weakness. The Relative Strength Index sits around 46, below the neutral 50 mark, while MACD is modestly negative near -0.20, both consistent with a mild bearish setup.
If USD/JPY holds above 158.15, price action is likely to remain confined in a narrow consolidation band. A break lower would confirm a stronger corrective phase in favor of the yen.
Geopolitics and central banks in focus
Market attention is now centered on the next round of US–Iran talks expected over the weekend. The durability of the current Lebanon truce, due to expire around April 22, and any move toward extending or formalizing a peace accord will be crucial for risk appetite and energy markets.
Unresolved nuclear issues and the conditional nature of the Strait of Hormuz reopening mean geopolitical risk remains elevated, even as immediate supply fears have eased.
Traders will also closely monitor upcoming signals from central banks:
- Federal Reserve: Any commentary that shifts the perceived path of US rates—either reinforcing or pushing back against current cut expectations—could quickly ripple through the dollar and USD/JPY.
- Bank of Japan: The policy meeting on April 27–28 will be scrutinized for clearer guidance from Governor Ueda. His recent cautious tone has contributed to yen volatility, and any change in stance on the pace of future adjustments could significantly affect the currency.
Taken together, the combination of lower oil prices, shifting rate expectations and tentative geopolitical easing has tilted the balance in favor of the yen in the near term, with technicals aligning with the fundamental pressure on the dollar.
Want to turn macro trends into trades? Learn how forex trading works and sharpen your currency strategy.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
