Japanese Yen Forecast: USD/JPY Back Above 159 as Peace Talks Falter

Japanese Yen, Iran Key Points

After a promising start to the day, markets are once again fearful that any sort of peace deal between the US and Iran remains far away.
Major US indices are back to flat after trading up more than +1% pre-market, with oil prices bouncing off their overnight lows, and the US dollar rallying on safe haven demand.
USD/JPY resistance looms in the upper-159.00s, where traders grow increasingly concerned with the risk of intervention on the part of Japanese authorities.

Today’s trade started on an optimistic note, but it’s been mostly downhill from there. Per news reports, the US delivered a 15-point peace plan to Iran via intermediaries, raising hopes that both sides could come to the proverbial negotiating table under the auspices of a longer ceasefire.

However, just before the US open, Iran rejected the proposal, stating that it was “not logical” to enter such a process with a counterparty that violates agreements, delivering its own 5-point proposal that appears similarly untenable from a US perspective.

Shortly before midday, news that Iran’s nuclear Bushehr nuclear power plant had been struck, “marking an alarming escalation in the US-Israeli terrorism against Iran’s civilian infrastructure” again raised fears that the war could devolve into strikes on non-military targets in the coming days. While the strike reportedly took place yesterday, the big takeaway for traders is that any sort of peace deal between the US and Iran is still far away.

As we go to press, major US indices are back to flat after trading up more than +1% pre-market, with oil prices bouncing off their overnight lows, and the US dollar rallying on safe haven demand against all of its major rivals.

Japanese Yen Technical Analysis: USD/JPY Daily Chart

Source: Tradingview, StoneX

Technically speaking, USD/JPY remains in focus. The pair is once again trading above 159.00 amid broad-based US dollar buying and concerns about the effects of elevated oil prices on the energy-import-dependent Japanese economy.

As the chart above shows, resistance looms in the upper-159.00s, where traders grow increasingly concerned with the risk of intervention on the part of Japanese authorities, but the move higher so far hasn’t been the type of one-way volatility that historically prompts such an action.

If the situation in Iran continues to deteriorate, USD/JPY could rally through this resistance zone, bringing the mid-2024 high near 161.80 into view next. Meanwhile, substantial progress toward peace could reverse today’s rally, with initial support coming in at the 21-day EMA near 158.00.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

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