On Thursday, April 2, 2026, USD/JPY is positioned around 159.40, following a significant surge earlier in the Asian and European sessions. However, it has since moderated its intraday gains during the American session, as the headline regarding the Iran-Oman Hormuz protocol momentarily shifted risk sentiment across all asset classes. The pair’s Thursday movement illustrates the contrasting forces at play: a robust risk-off opening, prompted by Trump’s escalation address on Wednesday night, propelled USD/JPY from its previous session close toward 159.50 and beyond. Subsequently, the Iran-Oman Hormuz protocol headline caused a brief retracement as the dollar’s safe-haven premium slightly diminished. Ultimately, the pair stabilized within the 159.37 to 159.50 range as the market accurately assessed that the Hormuz headline indicated potential diplomatic signaling rather than an actual reopening of Hormuz. The 159.40 level is positioned within a highly significant technical area. The pair demonstrated a robust recovery following a two-day corrective phase that had drawn it closer to the 20-day Exponential Moving Average around 158.70 — a level that proved to be pivotal. The sharp bounce following Trump’s address on Wednesday reinforces the notion that the 20-day EMA is serving as a dependable dynamic support in the ongoing uptrend. The session range on Thursday extended from around 158.30 at the previous week’s pullback low to 159.70 at Thursday’s intraday high, with the pair concluding near the midpoint of that range and maintaining its position above both the 20-period and 100-period Simple Moving Averages on the 4-hour chart. The US Dollar Index increased by 0.5% to approach 100.00 for the day, indicating a general strengthening of the dollar that was supporting USD/JPY regardless of factors specific to Japan.
The prevailing understanding regarding USD/JPY in times of geopolitical tension is that the Japanese yen tends to appreciate as a safe-haven asset — a trend observed during the 2008 financial crisis, the 2011 Fukushima disaster, and several other risk-off scenarios throughout the last twenty years. Thursday’s price movement clearly contradicts that pattern, and comprehending the reasons behind this breakdown is crucial for strategizing in USD/JPY for the duration of the Iran conflict. In his address on Wednesday night, Trump committed to taking significant action against Iran over the next two to three weeks, indicating potential strikes on Iranian energy infrastructure, while offering no timeline for withdrawal or a diplomatic solution. The movement in USD/JPY exhibited a notable rally, contrasting with expectations of a yen-strengthening safe-haven response, which diverges from historical patterns. The rationale is rooted in the structural dynamics and particularities of Japan’s economic stance amid the ongoing conflict: Japan stands as a significant net importer of energy from the Middle East. About 90% of Japan’s crude oil imports are sourced from the Middle East, with a significant portion of these flows passing through the Strait of Hormuz. As Trump intensifies the conflict in Iran and prolongs the timeline for disruptions in Hormuz, Japan encounters an energy cost shock that is comparatively more severe than nearly all other major economies, including Europe. Rising oil prices negatively impact Japan’s trade balance, elevate input costs across the manufacturing sector, and generate inflationary pressures that stem from external sources rather than being domestically produced. This dynamic reverses the conventional safe-haven yen relationship in the context of the Iran war: instead of strengthening as a refuge during times of uncertainty, the yen declines when the conflict intensifies, as escalation poses distinct challenges to Japan’s fundamental economic standing. The dollar is gaining strength as the United States, being a net energy exporter, reaps the benefits of higher oil prices instead of facing drawbacks. Additionally, the Federal Reserve’s decision to keep rates steady at 3.75% preserves the interest rate differential, enhancing the appeal of dollar-denominated assets over those denominated in yen. The intersection of these two elements — Japan’s dependence on energy imports and the favorable interest rates in the US — establishes a USD/JPY landscape where typical safe-haven currency movements are inverted, leading to an increase in the pair rather than a decline during geopolitical tensions.
Christopher Lewis, with over 20 years of experience in forex and commodities trading, has made it clear what he is focusing on in the USD/JPY trade: “The 10-year yield is the first thing I’m watching, and I know I’ve been putting this at the front of every video for the last couple of weeks, but quite frankly, it’s the one thing that seems to matter.” The 10-year Treasury yield is presently situated around the 4.30% mark — a significant technical and psychological barrier that the market has been consistently probing from both directions without establishing a clear directional movement. The connection between US 10-year Treasury yields and USD/JPY stands out as one of the most consistently dependable correlations in the global forex markets. The overnight policy rate in Japan continues to hover around zero, a result of the Bank of Japan’s careful tightening cycle, which has unfolded at a pace more gradual and hesitant than what market participants had expected at its inception. The interest rate differential between the Fed’s 3.75% target rate and the BoJ’s near-zero policy rate stands at around 375 basis points at the short end of the curve — marking one of the most significant rate differentials between two major economy central banks in contemporary history. At the longer end of the curve, the 4.30% US 10-year yield stands in contrast to Japanese Government Bond yields, which remain notably lower despite the Bank of Japan’s relaxation of yield curve control. This situation fosters a carry trade dynamic that has been the main structural driver of USD/JPY’s upward trend throughout 2024, 2025, and into 2026. Lewis observed that after Trump’s Wednesday address, the 10-year yield surged before retreating to the 4.30% level — a shift he characterized as rather unexpected considering that “he didn’t really say anything that should have been much of a surprise during that speech.” The rationale behind the yield increase is that fixed income markets are factoring in heightened near-term inflation risks stemming from prolonged energy disruptions due to the Iran conflict. This scenario diminishes the likelihood of Federal Reserve rate cuts and raises the chances that yields will stay elevated or rise further. A Federal Reserve that is unable to lower rates due to energy-driven inflation projected at 3.6% according to BofA’s forecast — while also being unable to raise rates as growth slows to 2.3% — results in a stagnant rate environment. This situation sustains the 375 basis point short-end differential in favor of the dollar indefinitely, rather than allowing it to gradually diminish through anticipated rate cuts as many had expected for 2026.
In the case of USD/JPY, a 10 basis point rise in the US 10-year yield typically exerts significant upward pressure on the pair via the carry trade mechanism. Institutional capital that takes advantage of low-cost yen borrowing to invest in dollar assets with higher yields — the quintessential yen carry trade — gains appeal as the yield gap expands. On the other hand, a notable drop in US 10-year yields — prompted by a ceasefire announcement, a significant downturn in US economic indicators, or an unexpected dovish shift from the Fed — would narrow the carry trade differential and set the stage for a swift unwinding of USD/JPY, potentially driving the pair back toward 157 or lower in a brief timeframe. The technical analysis of USD/JPY must address the 160.40 resistance level — a price that marks the peak the yen has reached against the dollar since 1990, the year Japan’s economic bubble was still expanding before entering a prolonged period of deflation. Lewis articulated this situation with notable seriousness: “We are pressing or at least had been until a couple of days ago, a major resistance barrier in the form of the 160.40 yen level or so, which was a swing high going all back to 1990.” There are numerous inquiries to consider, and should we experience an upward breakout, it will significantly impact the Japanese yen. The importance of a 36-year resistance level is paramount in technical analysis. When a price level has consistently acted as resistance for more than thirty years, it embodies the collective experience of a whole generation of market players — every institutional trader who has capitalized on yen weakness around 160, every intervention by the Japanese Ministry of Finance that has taken place near that threshold, and every technical analyst who has upheld sell positions against the yen at that point. Surpassing 160.40 on a consistent daily closing basis would signify more than just a technical breakout; it would represent the dismantling of a 36-year structural resistance level that has restrained every previous dollar rally against the yen.
Thursday’s price movement between 159.37 and 159.50 is roughly 90 to 100 pips beneath the 160.40 resistance level — a range that is close enough for potential advancement if the existing momentum continues, yet still short of reaching the pivotal threshold. The pair has been stabilizing around this level after nearing 160.40 in earlier sessions, followed by a two-day corrective pullback that brought USD/JPY closer to the 20-day EMA at 158.70. The rebound from the recent corrective pullback to the current 159.40 level serves as the initial signal that buyers are regaining control following a short period of consolidation. The outcome of the next attempt at 160.40 will represent a significant technical event in the forex markets this year, regardless of whether it succeeds or fails. On the 4-hour chart, the immediate resistance progression is distinctly outlined: 159.39 serves as the initial minor resistance, 159.70 represents a more substantial barrier where recent consolidation highs converge, and 160.00 acts as the round-number psychological level that leads up to the 160.40 all-time resistance. A daily close above 159.70 would transition the short-term momentum outlook from neutral to constructively bullish, thereby enhancing the likelihood of approaching 160.00 in the coming days. A daily close above 160.40 on sustained volume would indicate a strong opportunity to increase long USD/JPY positions, with targets set at 161.50 and possibly reaching 163.00 in the medium term. The support structure beneath Thursday’s 159.40 trading level is robust and clearly delineated, offering several layers of defense against a prolonged bearish reversal. Immediate support is identified at 159.32, with further backing at 159.24 — both levels are positioned near the 20-period SMA on the 4-hour chart, solidifying this zone as the crucial base for the ongoing upward movement. The 20-day Exponential Moving Average around 158.70 serves as the primary dynamic support, having effectively held during the two-day corrective move earlier this week. Its maintenance at this level indicates that the medium-term uptrend continues to be upheld.
Below the 20-day EMA, the ascending parallel channel floor around 158.20 represents the next key support — a level that aligns with previous consolidation support and the channel structure that has been directing USD/JPY upward since mid-March. Lewis pinpointed the 158 yen level as “a significant support level that I think is backed up by the 50-day EMA, so I’ll be watching that very closely.” The intersection of the channel floor, the 50-day EMA, and the key level at 158.00 establishes a support zone of notable technical importance. Lewis clearly articulated his positioning strategy: “As long as we can stay above the 158 yen level, I’m looking for short-term bounces that I can buy into.” I do not have any inclination to short this pair. A sustained daily close below 158.00 would indicate a significant weakening in the technical framework, potentially leading to a test of the 157.40 level, where previous consolidation aligns with the downward channel projection. According to the analysis from RoboForex, if the price falls below 157.40, the initial target for a more aggressive corrective move is set at 157.70, with a possible extension down to 156.00 in the most bearish scenario. Lewis’s clear assertion that he has “no interest in trying to short this market” underscores the prevailing analytical viewpoint that the interest rate differential, Japan’s energy import vulnerability, and the geopolitical landscape present structural challenges for yen strength, complicating the potential for sustained declines in USD/JPY despite any short-term triggers.