USD/JPY, Oil Forecast: Two trades to watch

USD/JPY falls sharply while on intervention watch & ahead of the NFP report

USD/JPY rose to a fresh 40-year high of 162.80 before a sharp rebound in the yen sent the pair lower.

The catalyst for the move remains unclear, but it comes as traders remain on high alert for possible intervention by Japanese authorities. If the move was intervention-related, it appears to have been considerably smaller than previous episodes, suggesting it may instead have reflected thin liquidity and nervous positioning around key levels.

The yen had moved well beyond levels that have previously prompted official intervention, reinforcing expectations that Japanese authorities remain uncomfortable with the pace of the currency's depreciation.

However, even if intervention has occurred, history suggests it is unlikely to reverse the broader trend unless accompanied by a narrowing in the U.S.-Japan interest-rate differential. Previous interventions provided only temporary support before the yen resumed weakening as markets continued to price higher U.S. interest rates.

The U.S. dollar is also softer against its major peers following the sharp move in the yen, while attention now turns to today's U.S. non-farm payroll report, which has been brought forward to Thursday because of the Independence Day holiday.

Economists expect payrolls to increase by 110,000 in June, down from 172,000 in May, while the unemployment rate is expected to remain unchanged at 4.3%. Average hourly earnings are forecast to rise 0.3% month-on-month.

The report could answer two key questions. First, whether the labour market is genuinely beginning to cool after May's surprisingly strong payrolls report. Second, whether one-off factors inflated May's headline figure. Another strong employment report would reinforce the view that the U.S. economy remains resilient and strengthen expectations that the Federal Reserve could raise interest rates later this year.

Markets are currently pricing around a 65% probability of a September rate hike. A stronger-than-expected payrolls report would likely lift Treasury yields and the U.S. dollar, potentially driving USD/JPY back towards its recent highs.

USD/JPY Forecast – Technical Analysis

USD/JPY broke above the upper boundary of its rising wedge pattern, invalidating the previous bearish reversal setup and extending to a 40-year high of 162.84 before reversing sharply lower.

The pair briefly fell to 161.25 before recovering towards 161.70, while the pullback has helped ease the previously overbought RSI.

Buyers will look for a move back above 162.84 to create a fresh higher high and expose 163.00 ahead of 165.00.

Support is seen around the 160.50–160.00 zone. A break below there would expose the 50-day SMA near 159.60, followed by stronger support around 158.00.

Oil continues to fall as supply rebounds & OPEC could lift output targets

Oil prices are falling for a third consecutive session as progress in U.S.-Iran negotiations continues to erode the geopolitical risk premium that had supported crude prices earlier this year.

WTI has slipped to around $67.50, while Brent has fallen back towards $70 per barrel after Qatar reported further progress in indirect talks between Washington and Tehran over the Strait of Hormuz.

The next round of negotiations is expected after July 9, following the funeral ceremonies for Iran's late Supreme Leader.

Commercial shipping through the Strait of Hormuz has recovered sharply in recent weeks, helped by increased U.S. naval support. According to U.S. officials, tanker traffic has now returned to pre-conflict levels, allowing more crude to reach global markets and easing fears of supply disruptions.

As geopolitical risks continue to fade, the market's focus has shifted back towards fundamentals. With supply recovering and demand growth remaining subdued, investors are increasingly concerned that the market could move into oversupply during the second half of the year.

Those concerns are being reinforced by expectations that OPEC+ will approve another production increase when the group meets on Sunday, adding further downward pressure to prices.

Oil Forecast – Technical Analysis

Oil has broken below its symmetrical triangle pattern and the 200-day SMA, falling to $67.50, its lowest level since late February.

The RSI has moved into oversold territory, suggesting the recent sell-off may pause before the next leg lower.

Sellers will look for a move below $67.50 to expose the February low around $62.20. Below there, attention turns to the psychological $60 level, followed by the 2025 low near $55.

Any recovery would first need to reclaim $70, which marks the 78.6% Fibonacci retracement of the move from $55 to $120. A break above there would expose the 200-day SMA near $73 before bringing $80 back into focus.