The USD/JPY pair continued its upward trend from recent days, opening the week with a positive gap and reaching around 159.85 during the Asian session. However, worries about potential intervention have limited further gains in the spot prices.
The collapse of peace talks between the US and Iran is likely to spark a wave of global risk aversion, which tends to bolster the US dollar’s status as a reserve currency. Additionally, soaring oil prices have intensified inflation concerns and strengthened expectations for a hawkish stance from the US Federal Reserve (Fed), which further supports the dollar/yen pair.
Conversely, the Japanese yen (JPY) has been pressured by economic worries linked to the energy import shock stemming from the conflict in the Middle East. Nonetheless, speculation that authorities may intervene to curb the yen’s decline is preventing bearish traders from aggressively shorting the USD/JPY pair.
The bullish sentiment remains after last week’s rebound from the horizontal support zone of 158.25-158.20. Moreover, the USD/JPY pair sits comfortably above its 200-period simple moving average (SMA), and the Relative Strength Index (RSI) is near 63, not yet indicating overbought conditions, which suggests a solid upward momentum.
Furthermore, the Moving Average Convergence Divergence (MACD) has shifted to a more positive territory, indicating that buyers currently maintain the upper hand. Still, it seems USD/JPY bulls may prefer to wait for a strong hold above the psychological level of 160.00 before making any further positions to extend the three-day bull run.
As for potential support, the initial backing is provided by the 200-period SMA at 158.56, which supports the broader uptrend and would be the first crucial level to monitor if a corrective pullback occurs. This is followed by support at 158.25-158.20, and at 158.00, where a break could expose the USD/JPY pair to further vulnerabilities.
