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USD/JPY dropped 1.25% on Thursday, sliding back below the 158.00 handle to settle near 157.80 in a session dominated by broad Yen strength. The pair had rallied to within a few pips of the 160.00 level earlier in the week before reversing sharply, and Thursday's large bearish candle erased most of the gains accumulated over the prior five sessions. Price is now trading in the middle of the wide range between 152.00 and 160.00 that has contained price action since late January.
The Bank of Japan (BoJ) held its policy rate at 0.75% on Thursday, as widely expected, but the accompanying statement and Governor Kazuo Ueda's press conference carried a notably hawkish tone. Ueda warned that rising crude oil prices from the Middle East conflict could push underlying inflation higher, adding that companies may pass on costs more aggressively than they did after the war in Ukraine given that wages and prices are already rising actively. Preliminary shunto wage demand data is averaging close to 5.9%, with Rengo's first-round results due on March 23. Japanese markets will be closed on Friday for Vernal Equinox Day, which could thin liquidity and keep the pair range-bound heading into the weekend.
On the US Dollar side, the Federal Reserve (Fed) held rates at 3.50%-3.75% on Wednesday in an 11-1 vote, with Governor Miran dissenting in favor of a cut. Updated projections still point to one reduction this year, but Chair Jerome Powell noted it is "too soon to know" the full economic impact of the Iran conflict, and February's Producers Price Index (PPI) came in well above expectations at 0.7% MoM versus 0.3% forecast. Thursday's US data was mixed, with initial jobless claims falling to 205K against a 215K consensus while new home sales plunged 17.6% MoM.
USD/JPY daily chart
Technical Analysis
In the daily chart, USD/JPY trades at 157.85. The near-term bias is bullish as price holds well above the rising 50-day EMA near 156.70 and extends the rebound from the mid-152.00s. The wide gap between spot and the 200-day EMA around 153.70 underscores a firmly established uptrend, while the Stochastic RSI remains in elevated territory despite easing from extreme overbought, indicating persistent upside pressure rather than a completed top.
Initial support emerges at 156.70, where the 50-day EMA aligns with recent swing lows, followed by 155.90 ahead of the stronger 153.70 zone defined by the 200-day EMA. As long as price holds above 156.70, buyers are likely to probe resistance at 158.00, with a break exposing the recent peak near 159.90. A daily close below 155.90 would weaken the bullish structure and open a deeper correction toward 153.70, but the broader trend remains pointed higher while spot trades above that longer-term average.
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