FX.co ★ USD/JPY

The US dollar encountered some selling pressure against the Japanese yen during Thursday's Asian session, bringing a three-day winning streak to a halt as spot prices retreated but remained above the 159.00 handle. The pullback, however, appears limited, with traders now shifting their focus to Tokyo inflation data and the highly anticipated Jackson Hole symposium later this week. The greenback's upward momentum has been tempered by renewed optimism surrounding a potential breakthrough in US-Iran relations, with reports suggesting that a ceasefire agreement could be announced in the coming days. Russian state media circulated reports that Washington and Tehran had reached a new truce deal, while other sources indicated that Iran and Oman had agreed on a commercial shipping corridor through the Strait of Hormuz. Those diplomatic overtures have helped ease geopolitical tensions that had been supporting safe-haven demand for the dollar. That positive news, however, has been somewhat offset by Wednesday's Personal Consumption Expenditure data, which showed the headline index holding steady at 3.7% year-over-year, slightly above market forecasts and unchanged from the previous month. The sticky inflation reading underscores the persistent price pressures confronting the US economy and reinforces the case for the Federal Reserve to maintain a hawkish posture. Yet the market's response has been relatively muted, with traders now looking ahead to Fed Chairman Kevin Warsh's Friday address for clearer signals on the policy trajectory. His remarks are expected to provide crucial guidance on whether the central bank is leaning toward another hike or preparing to hold steady. On the yen side, the Japanese currency continues to grapple with a challenging environment marked by Japan's widening fiscal deficits and the still-substantial interest rate gap with the United States. Although markets have been pricing in a faster pace of BOJ tightening, the fundamental headwinds facing the yen remain significant, limiting any sustained recovery. The combination of stubborn US inflation, cautious optimism over Middle East diplomacy, and the persistent yield differential suggests that USD/JPY could remain trapped in a range-bound pattern, awaiting fresh catalysts from the Jackson Hole gathering and upcoming economic releases.

USD/JPY is currently trading near 159.35, hovering within a tight cluster of moving averages that spans just a handful of pips across both timeframes, a classic setup that often precedes a significant directional move. On the hourly chart, the 50-period SMA is perched at 159.25 while the 200-period SMA rests slightly lower at 159.10. That configuration tilts mildly bullish in the near term, with the 50 SMA perched above the 200 SMA in a golden cross formation that hints at underlying upward momentum. Yet the narrow gap between the two, barely 15 pips, suggests that the trend is still in its infancy and could easily reverse if selling pressure intensifies. Both moving averages are nudging higher, though the 50 SMA appears to be losing some of its upward slope, which could signal waning bullish conviction. Shifting to the four-hour chart, the 50 SMA is positioned at 159.10 while the 200 SMA looms higher at 160.50, meaning price is trading about 25 pips above the shorter average but roughly 115 pips below the longer one. That creates a mixed technical picture; near-term support from the 50 SMA is offset by the overhead resistance of the 200 SMA, which has capped upside attempts in recent sessions. The gap between the two H4 averages stands at about 140 pips, with the 50 SMA residing below the 200 SMA in a bearish crossover configuration that underscores the broader downtrend. This cross-timeframe dynamic, bullish signals on the hourly chart clashing with bearish signals on the H4, highlights a market caught between competing forces. Turning to the horizontal levels that exist independently of the moving averages, the first resistance barrier sits at 159.65, marking Thursday's peak and a level that has repeatedly turned back buyers. Above that, a supply zone stretches from 159.90 to 160.10, followed by a more formidable hurdle at 160.40. Clearing those levels would expose 160.80 and then 161.20. On the downside, initial support rests at 159.00, a level that has provided a floor on multiple occasions. A break below that would expose 158.70, then 158.40, a confluent support zone where the hourly 200 SMA and H4 50 SMA converge. Further down, 158.10 and 157.80 represent deeper demand pockets.