USD/JPY tumbles as softer US data and BoJ hawkish tilt collide with shifting war sentiment

• USD weakens on hot inflation signals and easing safe-haven demand.
• BoJ rate outlook firms as officials consider higher price forecasts.
• Iran war headlines swing sentiment, supporting the Yen on risk improvement.

The USD/JPY pair is trading with a bearish bias near the 158.90 region on Tuesday, extending recent losses as the US Dollar (USD) continues to soften amid improving risk sentiment on renewed hopes of United States (US)-Iran negotiations. On the one hand, Reuters reported that the US and Iran will return to Islamabad for peace talks later this week or early next week. On the other hand, however, the White House reported that there is no date yet for further discussions.

The Greenback is facing pressure following Tuesday’s US data, which strengthens the narrative of hot inflation. The March Producer Price Index (PPI) increased less than anticipated, at 3.8%, but not enough to alleviate concerns about persistent price pressure or reduce the urgency for the Federal Reserve (Fed) to implement further tightening measures.

On the Japanese side, the Japanese Yen (JPY) is gaining momentum as reports indicate that the Bank of Japan (BoJ) is considering raising its price forecasts. The BoJ will have a monetary policy meeting in about two weeks, as will the Fed. This reinforces expectations that policymakers may continue normalizing their economic policy.

Technical analysis:

On the four-hour chart, USD/JPY trades at 158.87, maintaining a bearish near-term bias as it remains capped below both the 20-period Simple Moving Average (SMA) at 159.24 and the 100-period SMA at 159.27. The pair is attempting to stabilize after recent losses, but the proximity of the first horizontal resistance at 158.94 reinforces the impression of overhead supply, while the Relative Strength Index around 42 suggests only modest, sub-neutral momentum and limited recovery strength for now.

On the downside, initial support is aligned at 158.78, with additional floors seen at 158.72 and 158.61, forming a relatively tight demand band that could slow further declines if tested. On the topside, a break above 158.94 would be needed to ease immediate pressure, with subsequent resistance clustered at the 20-period SMA near 159.24 and the 100-period SMA at 159.27, where sellers are likely to re-emerge unless momentum improves materially.

(The technical analysis of this story was written with the help of an AI tool.)