Falling Oil Prices and Lower Yields Weigh on USD/JPY

USD/JPY is losing momentum after failing several times to break above the 159 level, with falling oil prices and lower US Treasury yields putting pressure on the pair. Hopes that oil supply flows through the Strait of Hormuz may improve, along with renewed talk of a possible US-Iran deal, pushed crude prices sharply lower and reduced demand for the dollar against the yen.

The pair remains heavily driven by US-Japan yield spreads and central bank expectations. Markets are now closely watching comments from BOJ board member Junko Koeda for signs of a more hawkish stance, while US jobless claims, PMI data, and remarks from incoming Fed Chair Kevin Warsh could also influence Fed rate expectations and Treasury yields.

Technically, USD/JPY remains vulnerable to a deeper pullback while trading below 159. A move below the 50-day moving average could expose 158, followed by 156 support levels. On the upside, a sustained break above 159 would shift focus back toward 160, but for now the bias favours selling rallies rather than buying dips.

USD/JPY Daily Chart