USD/JPY Price Analysis: Yen’s Demand Soars After Israel Attack

• There were reports that Israel had attacked Iran in retaliation.

• Ueda said the BoJ might have to hike rates if the yen continues falling.

• US unemployment claims held steady from the previous week.

The USD/JPY price analysis paints a bearish picture, influenced by the yen’s surge. The surge came from soaring safe-haven demand amid escalating tensions in the Middle East. At the same time, BoJ governor Kazuo Ueda signalled a possible rate hike if the yen continues its decline.

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On Friday, the yen gained popularity among investors as one of the traditionally safe assets. This happened after reports that Israel had attacked Iran in retaliation. Consequently, investors feared the war would escalate, leading to a decline in risk appetite. However, the USD/JPY pair reversed most of its decline soon after, as it became unclear whether the attack had happened. 

Meanwhile, Bank of Japan governor Kazuo Ueda said on Thursday that the central bank might be forced to hike rates if the yen continues falling. According to him, a further decline in the yen could lead to a spike in inflation. 

A rate hike would give breath to the yen, which has recently fallen to its lowest level since 1990. Therefore, investors will watch the BoJ policy meeting next week for more clues on the rate hike outlook.

Data revealed that US unemployment claims held steady from the previous week, missing forecasts for a slight increase. It indicates continued strength in the US labor market, which has remained resilient despite high rates. Therefore, markets continue pushing back the timing of the first Fed rate cut. 

USD/JPY key events today

There are no economic events in the US or Japan today. Therefore, investors will keep an eye on the Middle East.

USD/JPY technical price analysis: 30-SMA puncture signals strong bearish momentum.

On the technical side, the USD/JPY price is bullish as it sits above the 30-SMA and is making higher highs and lows. However, bears recently made a strong candle that punctured the 30-SMA support. This indicated a surge in bearish momentum. However, they failed to close below the SMA. Moreover, the price pulled back from the 154.00 critical level. 

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Despite the failed attempt, bears have shown they might be ready to take over. Moreover, the attempt came after the RSI made a bearish divergence, signaling a possible reversal. A break below 154.00 would allow the price to retest the 152.00 key level.

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