USD/JPY declines alongside the US dollar, retreating from the 159.50 level.

USD/JPY weakens below 159.50 during Monday’s Asian session, extending its pullback from near the key 160.00 psychological level. The pair is pressured by renewed US dollar softness and lingering fears of Japanese intervention, while a slight improvement in risk sentiment also supports the yen. Meanwhile, traders are largely looking past tensions between the US and Iran, turning their focus to this week’s monetary policy decisions from the Bank of Japan and the Federal Reserve.

Technical Analysis

Aside from a few brief knee-jerk moves, USD/JPY has been trading within a range since mid-March. Considering the recent solid rebound from the technically important 200-day EMA, this price action can still be seen as a phase of bullish consolidation, supporting a positive overall outlook.

Momentum indicators also point to a constructive setup rather than an overstretched market. The RSI sits near 57, indicating sustained upward pressure without entering overbought territory. Meanwhile, the MACD remains slightly below the zero line, suggesting only mild bearish momentum that has yet to threaten the broader uptrend.

That said, buyers should wait for a clear and sustained move above the 160.00 psychological level before targeting further upside. In the meantime, any pullbacks are likely to be viewed as corrective within the broader bullish structure, as long as USD/JPY stays above the key long-term support near 154.76. A decisive break below this level would be needed to indicate a more significant shift in trend.

Fundamental Analysis

USD/JPY extends last week’s rebound from the mid-157.00s, advancing for a fourth consecutive day on Thursday. The Japanese yen remains under pressure due to economic concerns tied to escalating Middle East tensions and expectations that the Bank of Japan may delay further rate hikes. At the same time, ongoing geopolitical uncertainty reinforces the US dollar’s safe-haven appeal, pushing the pair to a one-and-a-half-week high during the early European session.

Although US President Donald Trump announced a temporary extension of the Iran ceasefire just before its expiration, investors remain doubtful about any lasting de-escalation. Limited progress in negotiations, tensions surrounding the Strait of Hormuz, and continued friction—highlighted by the US naval blockade of Iranian ports—keep risks elevated. Iran’s chief negotiator, Mohammad Bagher Ghalibaf, stated that reopening the strategic waterway is not feasible under current conditions. These developments raise concerns about disruptions to energy supplies, posing potential strain on Japan’s economy and weighing further on the yen.

Meanwhile, reports indicate that the Bank of Japan is inclined to keep policy unchanged this month, as uncertainty over the Middle East conflict clouds the economic and inflation outlook. This adds to downward pressure on the yen, though the central bank is still expected to signal readiness to tighten policy as early as June amid rising inflation. Additionally, speculation that Japanese authorities could intervene to support the currency may limit further yen weakness and cap USD/JPY gains near the 160.00 psychological level. Even so, any meaningful pullback appears limited given the underlying strength of the US dollar.

Higher crude oil prices are also reviving inflation concerns, reducing expectations of a dovish stance from the Federal Reserve. This pushes US Treasury yields higher and continues to support the dollar, suggesting that the overall bias for USD/JPY remains tilted to the upside. Traders now turn to upcoming US data, including weekly jobless claims and flash PMI releases, though attention is likely to remain focused on developments in the US–Iran situation, which could drive further market volatility.