USD/JPY Outlook: Energy Prices Take the Lead as Markets Await Key US Data

USD/JPY is showing mixed signals after failing to extend higher despite strong support from fundamentals. Energy prices appear to have become the main short-term driver for USD/JPY. Because Japan relies heavily on imported energy, rising energy prices usually weaken the yen, while easing energy pressures can support it.

The broader macro backdrop still supports the US dollar. Recent US data has been strong, particularly the ISM services report and ADP employment figures, reinforcing the view that the US economy remains resilient. As a result, markets now expect only about 40 basis points of Federal Reserve rate cuts this year, with almost no chance of a cut in the first half of the year.

Technically, the bearish signal needs confirmation before assuming a deeper pullback. If selling pressure continues, key downside levels to watch include 156.83, the February uptrend line, the 50-day moving average, and support near 155.64. On the upside, a break back above 157.88 would invalidate the bearish signal and could open the way toward the 2026 high near 159.45.

USD/JPY Daily Chart

In the near term, USD/JPY will likely remain sensitive to both energy market developments and incoming US data, with February nonfarm payrolls standing out as the most important risk event ahead.