USD/JPY continues its upward trajectory on Wednesday, rising to 158.78 following a volatile start to the week. Pressure on the yen has eased amid a pullback in oil prices and expectations of a potential resolution to the Middle East conflict-a development of particular significance for Japan’s energy-importing economy.
The move comes amid reports of US diplomatic efforts aimed at resolving the conflict with Iran. However, scepticism persists in the market, as Tehran had previously denied the existence of any negotiations with Washington.
Additional support for the yen stems from expectations of possible government intervention. Japanese officials have signalled their readiness to take necessary measures to stabilise the currency.
It has also been reported that Japan’s Ministry of Finance is in contact with market participants regarding potential intervention in the oil futures market, given its impact on the yen.
Technical Analysis
On the H4 chart, USD/JPY is forming a consolidation range around the 158.60 level. A decline to 157.40 is expected today, followed by an increase to 158.50. Should the market break upwards from this range, a correction towards 160.10 would be relevant to consider. Subsequently, a new downward impulse to 157.40 is anticipated, with the potential for the correction to extend to 156.00.
Technically, this scenario is confirmed by the MACD indicator-its signal line is below zero and pointing strictly downwards, reflecting the potential for continued correction.
On the H1 chart, the market is shaping a downward wave pattern towards 157.40. Reaching this target level will be considered today. Following the completion of this wave, the development of the next growth wave to 160.10 (test from below) is expected.
The scenario is confirmed by the Stochastic oscillator-its signal line is below the 50 level and pointing strictly downwards towards 20, indicating that short-term downside potential remains.
Conclusion
USD/JPY remains in a growth-oriented mood as easing oil prices and tentative hopes for diplomatic progress in the Middle East offer some relief to the yen. While reports of US-led negotiations with Iran have contributed to a pullback in energy markets, market scepticism persists given Tehran’s earlier denial of talks. Japanese authorities stand ready to intervene should volatility spike, adding an element of caution for traders. Technical indicators point to a short-term correction lower before the broader upward trend potentially resumes towards 160.10. The yen’s trajectory remains closely tied to developments in both energy markets and geopolitical tensions, which continue to shape the Bank of Japan’s policy landscape.
