The USD/JPY pair trades calmly around 160.00 during the European trading session on Tuesday. The pair trades broadly sideways amid uncertainty surrounding the ongoing war in the Middle East.
Market participants remain cautious about how the ongoing war will flare after the completion of United States (US) President Donald Trump’s deadline to Iran for reopening the Strait of Hormuz.
Over the weekend, US President Trump threatened to destroy Iranian civilian infrastructure if it doesn’t reopen the Strait of Hormuz before Tuesday, 08:00 PM ET.
On Monday, US President Trump threatened again, stating that Iran “can be taken out in one night, and that might be tomorrow night” if it denies accepting the proposal.
In Japan, weak Overall Household Spending data for February could force traders to pare hawkish Bank of Japan (BoJ) bets in the near term. Earlier in the day, the data arrived -1.7% Year on Year (YoY), surprisingly lower than -0.7% estimates. In January, Overall Household Spending declined by 1%.
This week, major triggers for the US Dollar will be the Federal Open Market Committee (FOMC) minutes of the March policy meeting and the US Consumer Price Index (CPI) data for March.
USD/JPY technical analysis
USD/JPY trades almost flat at around 160.00 as of writing. The near-term bias is mildly bullish as price holds above the rising 20-day Exponential Moving Average (EMA) and trades in the upper half of an ascending parallel channel. The recent series of higher lows above the channel floor near 158.40 supports the uptrend, while the RSI around 58 stays comfortably above the 50 line, signaling persistent upside momentum rather than exhaustion.
Initial support emerges at the channel bottom near 158.40, where a break would expose deeper downside towards 157.70. On the topside, the first resistance aligns with the channel top near 160.90, and a daily close above that level would confirm a bullish extension towards 162.00.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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