The Middle East situation boosting the dollar's safe-haven demand, combined with weak Japanese consumption, causes the dollar to test the 160 round-number resistance against the yen again.

CoinPass Finance APP News — On Tuesday Asian session, USD/JPY reached a one-week high, approaching the 160.00 level but failed to break through effectively, showing a generally oscillating and slightly bullish trend. The current exchange rate movement is mainly influenced by fundamental divergence and policy expectation negotiations.

From the Japanese side, weak economic data continues to suppress the yen. According to data released by Japan’s Ministry of Internal Affairs and Communications, Japan’s February household spending decreased by 1.8% year-on-year, marking the third consecutive month of decline, indicating that consumer spending momentum remains weak. Although there was some month-on-month recovery, overall performance fell short of expectations, reflecting that domestic demand recovery remains fragile. This data reinforces market cautiousness about Japan’s economic outlook, thereby weakening the yen’s performance.

Meanwhile, ongoing tensions in the Middle East further amplify Japan’s economic pressure. Due to Japan’s heavy reliance on energy imports, especially crude oil supplies from the Middle East, risks surrounding the Strait of Hormuz raise concerns that rising energy costs will hinder Japan’s economic recovery. Against this backdrop, market expectations for a short-term rate hike by the Bank of Japan have significantly cooled, further bearish for the yen.

In terms of the US dollar, safe-haven demand remains the main supporting factor. U.S. President Donald Trump’s tough stance on Middle East tensions, along with Iran’s rejection of a ceasefire proposal, has heightened concerns about escalating conflict. This not only boosts the dollar’s safe-haven appeal but also strengthens market expectations of rising inflation, supporting the Federal Reserve’s hawkish stance. As a result, the dollar remains strong, providing upward momentum against the yen.

However, it is important to note that expectations of intervention by Japanese authorities may impose significant constraints on the exchange rate. Historical experience shows that when the exchange rate approaches or breaks through key psychological levels, the probability of policy intervention increases markedly. Therefore, despite the fundamental bias toward dollar strength, the exchange rate faces strong resistance around the 160 level.

From a technical perspective, on the daily chart, USD/JPY remains in an upward trend channel since the February lows, with higher highs and higher lows, indicating a complete trend structure. The current price approaching previous highs shows clear technical resistance. Key resistance is located in the 160.00–160.50 range; a successful break above could open further upside space. Support levels are at 158.00, with further support at 156.50. Momentum indicators show bulls still in control, but the pace of rise has slowed.

On the 4-hour chart, the price shows a oscillating upward structure, with short-term moving averages remaining in a bullish alignment, but repeated resistance near the 160 level indicates strong selling pressure above. RSI is near high levels but has not entered extreme overbought territory, suggesting some upward momentum remains but limited in scope. A break above 160.50 could trigger accelerated gains; a drop below 158.00 might signal a short-term correction.

Editor’s Summary:

Currently, the USD/JPY trend is dominated by “Dollar strength + weak Japanese fundamentals,” but also constrained by policy intervention expectations. Middle East tensions and rising energy prices exert pressure on Japan’s economy, weakening the yen, while the dollar remains supported by safe-haven demand and interest rate expectations. Technical analysis shows the pair is still in an upward trend but faces strong resistance near psychological levels. In the short term, USD/JPY may continue to oscillate at high levels with a bullish bias, with breakout prospects depending on geopolitical developments and policy signals.