USDJPY Forecast: Yen Bounces Back after Trump Paused Project Freedom
- The USD/JPY pair is trading near the 157.20 level
- Trump paused the ‘Project Freedom’ for closing the Strait of Hormuz
- High-impact ADP Employment data is due today
Last week, the yen surged as much as 3% to 155.5 per dollar after weakening past the critical 160 level, though Japanese officials have not confirmed any intervention. Both the Bank of Japan (BoJ) and the Federal Reserve kept interest rates unchanged in recent meetings, preserving a wide US-Japan rate gap that continues to underpin dollar strength and weigh on the yen.
Yen Surged, Then Pulled Back: Key Price Driver
The Strait of Hormuz conflicts are the main force of market shift now, depending on the oil and the US dollar price.
The Strait of Hormuz Tensions
When the Strait of Hormuz is blocked and oil prices surge, Japan suffers more than the US, as Japan imports almost all of its oil, resulting in the yen falling. Trump’s operation pause brought some relief, but the situation is still unstable.
Yield Differentials Favor the Dollar
The US 10-year Treasury yield sits at 4.43%, pressing the 4.50% threshold — a sustained breach could trigger algorithmic yen selling, pushing the pair toward the 160 zone. As long as US yields stay elevated and BoJ holds rates steady, the fundamental backdrop supports a stronger dollar against yen.
Intervention Risk Keeps Bulls Cautious
Traders remain alert for further action from Japanese authorities, as Tokyo often takes advantage of thin holiday liquidity and typically conducts multiple rounds of yen buying when it steps in. This means even if the dollar looks strong, a sudden government move could send USD/JPY tumbling very quickly with little warning.
“It’s probably going to take another round of significant intervention to push the dollar more significantly lower,” said Shaun Osborne, chief currency strategist at Scotiabank.
Technical Outlook
USD/JPY is currently consolidating between the 155.50 support level (the post-intervention floor) and the 159.00–160.00 resistance zone.
Key levels to watch:
- Support: 155.50
- Resistance: 158.50- 160.00, Analysts at Scotiabank have flagged 159.00 as the next major resistance test.
The RSI indicator remains neutral to bullish.
Advice for Traders
Be cautious for today’s big event- USA ADP (Automatic Data Processing) National Employment data release. The expected jobs data is 70,000. Last month it was 62,000.
- If ADP beats 70,000, the dollar likely strengthens, and USD/JPY could push toward 158.50–159.00.
- If ADP misses below 70,000, the dollar may weaken. USD/JPY could dip toward 156.00–155.50.
- Avoid holding large long USD/JPY positions above 159.00 without clear stop-loss levels.
- Stay away from placing orders during the ADP data release today.
