USD/JPY rose 0.37% on Tuesday to about 159.40, after reaching 159.65 in the US session. It has traded in a range of roughly 158.55 to 159.65 over recent sessions.
President Trump extended a deadline for direct talks with Iran after Tehran did not attend new discussions. This reduced near-term worry about disruption in the Strait of Hormuz, while risk assets firmed and the US Dollar Index slipped.
Market Drivers And Macro Backdrop
US March Retail Sales rose 1.7% month-on-month versus a 1.4% forecast. Fed Chair-designate Kevin Warsh gave hawkish testimony to Congress.
Japan’s adjusted March trade figures are due late Tuesday. National CPI is due Thursday, with consensus at 1.8% year-on-year for the ex-fresh food measure versus 1.6% previously.
On the 15-minute chart, USD/JPY traded at 159.41, above the day’s open at 158.88. Stochastic RSI was near 36, with support around 159.41 and then 158.88.
On the daily chart, USD/JPY traded at 159.41, above the 50-day EMA at 158.20 and the 200-day EMA at 154.64. Stochastic RSI was near 27, with support near 159.40, then 158.20 and 154.64.
Technical Levels And Policy Focus
Looking back to April 2025, we saw USD/JPY consolidating below the 160 level as the market reacted to easing tensions with Iran and strong US data. Today, the situation has evolved significantly, with the pair having tested levels near 170 earlier this month, making direct intervention from Japanese authorities the primary market focus. The core drivers have shifted from broad risk sentiment to a direct standoff between currency speculators and the Ministry of Finance.
While the specific geopolitical concerns of 2025 have faded, the Yen has failed to benefit from its traditional safe-haven status amid other global uncertainties. The currency’s weakness is now overwhelmingly driven by the interest rate differential between Japan and the United States. This gap remains substantial, with the carry trade continuing to pressure the Yen despite the Bank of Japan’s historic policy shift.
The Bank of Japan did exit its negative interest rate policy earlier this year, a major move we were anticipating back in 2025, but it has not been enough to reverse the trend. With the US Federal Reserve holding rates firm and the 10-year US Treasury yield sitting near 4.5%, the roughly 3.6 percentage point gap over Japanese government bonds makes selling the Yen attractive. This fundamental picture suggests that any dips in USD/JPY will likely be seen as buying opportunities by many market participants.
Japan’s recent national CPI data, which came in at 2.5%, remains above the BoJ’s target but hasn’t signaled the kind of aggressive inflation that would force rapid rate hikes. This leaves currency intervention as the main tool for authorities to combat Yen weakness, creating significant event risk. We believe Japanese officials are highly likely to act should the pair make another concerted push toward the 170.00 level.
Given the high risk of a sudden, sharp reversal caused by intervention, holding long spot positions is dangerous. For derivative traders, buying downside protection through JPY call options (USD/JPY puts) is a prudent strategy to hedge against or speculate on a sharp drop. Although implied volatility has increased, making options more expensive, they provide a defined-risk method to position for a government-induced correction in the coming weeks.
