Key Moments
- USD/JPY is trading 0.9% lower near 158.20 during Wednesday’s European session.
- The US Dollar Index (DXY) fell 0.75% to 98.75 as safe-haven demand eased after the US-Iran ceasefire.
- A breakdown from a symmetrical triangle below 159.00 shifted USD/JPY’s short-term bias to bearish. Resistance now clusters around 158.40-159.00.
Risk Sentiment Shifts After Ceasefire
USD/JPY fell sharply during Wednesday’s European session, trading near 158.20. The pair weakened as the US Dollar lost ground broadly. The two-week ceasefire between the US and Iran reduced demand for the Dollar as a safe-haven asset.
Meanwhile, the US Dollar Index (DXY), which measures the USD against six major currencies, declined 0.75% to 98.75. This shows broad-based Dollar weakness.
Geopolitical Developments Weigh on the Dollar
Earlier, President Trump paused planned strikes on Iranian civilian targets for two weeks. Iran agreed to reopen the Strait of Hormuz, a route for nearly 20% of global energy flows. The temporary ceasefire eased geopolitical tensions and reduced safe-haven demand for the Dollar.
This development also influenced expectations for US monetary policy. Global inflation expectations stabilized, and hawkish bets on the Federal Reserve eased. Previously expected rate hikes are now largely priced out.
According to the CME FedWatch tool, markets no longer expect a US interest rate increase this year. Earlier, traders had priced in two hikes after the conflict began.
US Dollar Performance Versus Major Currencies
The US Dollar weakened broadly. The New Zealand Dollar showed the strongest gains against it.
| US Dollar Price Today | |
|---|---|
| The USD showed the largest decline versus the New Zealand Dollar. Other major currencies also gained ground. |
The heat map framework measures base currency performance (left column) against the quote currency (top row). For example, USD/JPY shows the Dollar’s percentage change versus the Yen.
USD/JPY Technical Outlook
USD/JPY dropped toward 158.20 after breaking down from a symmetrical triangle on the four-hour chart. The pair now trades below the rising support line from 157.46, signaling a loss of upside momentum. The 200-period EMA near 158.40 acts as resistance and limits intraday recovery.
The 14-day RSI fell to 28, entering oversold territory. This indicates strong bearish momentum, but losses may moderate soon.
Initial resistance lies at 158.40, where the 200-period EMA aligns with the former support trend line. A descending trend line adds resistance near 159.00. A move above 159.00 could target 159.60 and ease bearish pressure.
Minor support is at 157.50. A break below this level would extend the downtrend toward 157.00. Given the RSI, any rebound into 158.40–159.00 is likely a selling opportunity while the price remains below the descending trend line.
Understanding Risk Sentiment
Risk-On vs Risk-Off
“Risk-on” and “risk-off” describe investors’ appetite for risk. In risk-on periods, investors favor higher-risk assets. In risk-off periods, they shift to safer assets with more predictable returns.
Key Assets to Monitor
During risk-on periods, equities and most commodities rise. Currencies of commodity exporters often strengthen, and cryptocurrencies usually gain. In risk-off periods, major sovereign bonds, Gold, and safe-haven currencies such as the Yen, Swiss Franc, and US Dollar tend to appreciate.
Currencies Favored in Risk-On and Risk-Off
In risk-on phases, the AUD, CAD, NZD, and some smaller currencies like RUB and ZAR often strengthen. Commodity prices usually rise, reflecting expected stronger economic activity.
During risk-off phases, the USD, JPY, and CHF gain. The Dollar benefits from reserve currency status and US debt inflows. The Yen strengthens as investors seek Japanese bonds. The Swiss Franc gains due to strict banking rules and perceived capital protection.
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