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This Thursday, the USD/JPY pair is aiming for Monday's high around 159.70. The Japanese yen (JPY) remains weak amid concerns that rising energy prices—driven by the war in the Middle East—will increase pressure on Japan's trade balance and worsen its medium-term economic outlook. Persistently high oil prices are also fueling inflation and creating a classic stagflation scenario, making it more difficult for the Bank of Japan to normalize monetary policy. Against this backdrop, combined with a broadly bullish outlook for the U.S. dollar, USD/JPY is receiving additional support.
On Wednesday, Iran's foreign minister stated that Tehran is considering a U.S. proposal to end the war but is not willing to engage in direct negotiations to resolve the escalating conflict in the Middle East. The deployment of additional U.S. forces in the region is increasing the risk of further escalation and effectively offsetting statements by U.S. President Donald Trump about a ceasefire. At the same time, hawkish expectations regarding Federal Reserve policy continue to support the dollar's appeal: market participants have largely ruled out further rate cuts and are increasingly pricing in rate hikes by the end of the year.The combination of the Fed's hawkish rhetoric and ongoing geopolitical uncertainty reinforces the U.S. dollar's status as the world's key reserve currency and suggests that the path of least resistance for USD/JPY remains to the upside.At the same time, concerns about possible currency interventions by Japanese authorities are preventing traders from aggressively increasing short positions in the yen and are limiting further gains in spot prices.
From a technical perspective, oscillators are positive, and prices are trading above all moving averages, confirming a bullish bias. The nearest target is Monday's high, followed by the March high. Support is expected at the 9- and 14-day EMAs, followed by the 20-day SMA and the round level of 158.00.
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