The USD/JPY pair has shown an upward trend for three consecutive days, reaching a four-week high of around 159.65 on Thursday. The Japanese yen remains weak amid economic concerns tied to the ongoing Middle Eastern conflict. This, combined with the overall strengthening of the U.S. dollar, exerts a positive influence on spot prices, though the risk of intervention may limit further growth in the pair ahead of important U.S. macroeconomic data.
Investors remain concerned that Japan's economy may face significant challenges due to ongoing disruptions in energy supplies through the Strait of Hormuz. Contributing to this, shipping in this strategically important area has sharply declined since the onset of the Middle Eastern conflict due to restrictions imposed by Iran on movement and the naval blockade of Iranian ports by the United States.
Additionally, resumed U.S. strikes against Iran increase the risk of further escalation of tensions in the region, continuing to undermine the Japanese yen's positioning and supporting the USD/JPY pair.
According to Reuters, on Wednesday, U.S. forces launched new strikes on Iran, targeting a military facility that posed a threat to American troops and commercial shipping in the Strait of Hormuz. It is also reported that U.S. armed forces intercepted and shot down several Iranian drones posing a similar threat. Moreover, U.S. President Donald Trump expressed dissatisfaction with the conditions of current negotiations with Iran, emphasizing that he would not be rushed into an agreement. This weakened hopes for a diplomatic resolution that could potentially end the three-month conflict.
These developments bolster the dollar's status as a reserve currency amid expectations that the U.S. Federal Reserve may raise interest rates in 2026 to address inflation, further supporting the USD/JPY pair. However, bears of the Japanese yen seem to be exercising caution amid speculation about potential intervention by Japanese authorities to support the national currency. Additionally, traders may prefer to adopt a wait-and-see approach ahead of Thursday's release of the Personal Consumption Expenditures (PCE) index and the preliminary U.S. GDP report.
From a technical standpoint, the pair faces difficulties in surpassing the 159.65 level. The next resistance could be the round level zone of 160.00 and above up to 160.50. Support is provided by the 9-day EMA around the round level of 159.00, below which the 50-day SMA will provide support. However, as oscillators are positive, bulls have the advantage.