Key Moments
- USD/JPY trades near 160.00 amid Middle East tensions.
- Weaker Japanese household spending for February at -1.7% YoY dampens hawkish BoJ expectations.
- The pair remains supported above the rising 20-day EMA and the lower boundary of an ascending channel near 158.40.
Geopolitical Tensions Keep USD/JPY Rangebound
USD/JPY is trading near 160.00 during Tuesday’s European session. Investors remain cautious due to heightened Middle East tensions.
Markets focus on the fallout from US President Donald Trump’s deadline to Iran on reopening the Strait of Hormuz. The uncertainty has restrained risk appetite, keeping the pair in a sideways pattern.
Over the weekend, Trump warned that Iranian infrastructure could be targeted if the Strait is not reopened. On Monday, he reiterated that Iran “can be taken out in one night” if it refuses the proposal. As a result, market caution remains high.
Japan Data Weakens BoJ Hawkish Bets
Domestic data added more nuance for yen traders. Japanese Overall Household Spending for February came in weaker than expected. This could reduce expectations of aggressive BoJ policy in the near term.
The figure printed at -1.7% YoY, below the -0.7% forecast. January spending had already fallen 1%. Softer data highlights consumer pressure and may lead traders to ease hawkish bets.
US Events in Focus for Dollar Traders
Attention shifts to US macroeconomic events this week. The FOMC March Minutes and March Consumer Price Index (CPI) are expected to guide USD/JPY moves.
These releases should clarify the Federal Reserve’s stance and the inflation trajectory, influencing positioning once the data is out.
USD/JPY Technical Setup: Mild Bullish Bias
USD/JPY trades near 160.00, holding above the 20-day EMA. Price remains in the upper section of an upward-sloping channel, maintaining a constructive short-term bias.
A series of higher lows above the channel floor near 158.40 underpins the trend. The RSI at 58, above the neutral 50 mark, indicates steady upside momentum without overextension.
| Technical Level | Description | Implication |
|---|---|---|
| 158.40 | Channel support | Break below could target 157.70 |
| 157.70 | Next downside target | Signals deeper corrective move |
| 160.90 | Channel resistance | Daily close above suggests bullish continuation |
| 162.00 | Upside objective | Potential extension of current uptrend |
Support remains at the channel floor near 158.40. A decisive drop could expose 157.70. Resistance appears at 160.90, and a daily close above it may open the way toward 162.00.
Risk Sentiment and Currency Impact
Understanding “Risk-On” and “Risk-Off”
“Risk-on” periods see investors confident and willing to take more risk. They allocate more capital to higher-risk assets. By contrast, “risk-off” periods reflect caution, as investors favor safer assets with steady returns.
Key Assets Reflecting Risk Appetite
During “risk-on,” equities usually rise. Most commodities, except Gold, benefit from stronger growth expectations. Commodity-linked currencies and cryptocurrencies may also gain.
In “risk-off” periods, flows favor bonds, especially government debt, while Gold strengthens. Safe-haven currencies like the USD, JPY, and CHF typically gain.
Risk-On Currencies
The AUD, CAD, NZD, and smaller currencies such as RUB and ZAR often strengthen during “risk-on” periods. These economies depend on commodities, which rise with stronger growth expectations.
Risk-Off Currencies
The USD, JPY, and CHF gain during “risk-off” periods. The USD benefits from its reserve status and safe government debt. The Yen benefits from demand for Japanese government bonds, largely held domestically. The Swiss Franc gains from strict banking regulations, offering capital protection.
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