USD/JPY Tests 159.00 as Middle East Tensions and BOJ Rate Expectations Drive Volatility

On Friday, US President Donald Trump announced a second round of negotiations, saying that the American delegation was heading to Islamabad and that the deal would be “reasonable and fair.” However, almost immediately, the Islamic Republic News Agency (IRNA) reported that Iran was refusing to take part in the consultations, while the private Tasnim channel clarified that the delegation would not travel to Pakistan as long as the White House blockade of the Strait of Hormuz remains in place. In addition, the Islamic Revolutionary Guard Corps (IRGC) once again blocked vessel traffic from its side, declaring that it would not lift the restriction until Washington removed its own. Tehran believes that the stated US willingness to reach a peace agreement may serve as cover for new attacks. It is worth noting that Iran has not officially confirmed its refusal to attend tomorrow’s meeting, while Trump reported that White House special envoy Steve Witkoff and senior presidential adviser Jared Kushner had departed for Islamabad. Against the backdrop of a possible resumption of hostilities, the UK Maritime Trade Operations (UKMTO) center described the situation in the Persian Gulf as “critical,” the highest risk level, citing a high level of naval activity that could lead to accidental incidents in the area. Under these conditions, investors are stepping back from bullish sentiment on the dollar and from attempts to test the 160.00 level. It should be recalled that the official truce between the United States and Iran, announced earlier, expires on April 22.

Meanwhile, March producer price data came in below the forecast of 1.1%, at 0.5% month-on-month: the broad pass-through of higher energy costs into wholesale prices has not yet taken place, easing inflation concerns. At the same time, the labor market remains resilient: initial jobless claims fell from 218.0K to 207.0K, while industrial production declined from 0.7% to –0.5% against expectations of 0.1%. This combination of data failed to provide the currency with a clear impulse, leaving it sensitive to geopolitical factors.

Investors are preparing for the Bank of Japan meeting on April 28: most analysts expect an interest rate hike despite the sharp rise in uncertainty linked to the US-Iran confrontation and the cautious rhetoric of Governor Kazuo Ueda. The official stated that the decision should take into account the low real cost of borrowing, while the country is facing a supply-side crisis driven by higher crude oil prices, something monetary policy can do little to restrain. The risk of currency intervention remains a limiting factor for price dynamics, while the 160.00 level is seen as a critical threshold, beyond which an unannounced market intervention by the authorities may follow, especially given the situation in the Persian Gulf region.

Support and resistance levels

On the daily chart, the Bollinger Bands are gradually turning downward: the price range is almost unchanged, remaining wide enough for the current level of market activity. The MACD is declining, maintaining a weak sell signal, with the histogram positioned below the signal line, while Stochastic is showing mixed dynamics in the center of its working area, reflecting a balance of forces in the ultra-short term.

Resistance levels: 159.00, 159.52, 160.00, 160.50.

Support levels: 158.50, 158.08, 157.50, 157.00.

Trading scenarios and USD/JPY forecast

Long positions may be opened after an upside breakout above 159.00 with a target at 160.00. Stop-loss: 158.50. Timeframe: 1–2 days. Short positions may be opened after a rebound from 159.00 and a breakout below 158.50 with a target at 157.50. Stop-loss: 159.00.