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  • Due to escalating geopolitical tensions, USD/JPY was heavily sold.
  • The Russian invasion of Ukraine has caused downward pressure on the safe-haven currency JPY.
  • In addition, the decline in US bond yields encouraged traders to bearish and increased their selling sentiment.

The USD/JPY forecast is negative as the JPY strengthens across the board amid risk-off sentiment stemming from the Russian attack on Ukraine. Early in the European session, the USD/JPY price fell to fresh three-week lows near 114.40.

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A deteriorating situation in Ukraine triggered aggressive selling in early trading Thursday, breaking the overnight consolidation phase. NATO confirmed the invasion of Ukraine after Russian President Vladimir Putin approved a special operation in Donbas. As a result, global stock markets fell sharply. As a result, spurring demand for the safe-haven Japanese Yen puts heavy downward pressure on the USD/JPY pair.

According to recent reports, the Ukrainian border around Belarus is under attack by Russian troops. Ukraine’s border guards also said that the shelling was coming from Crimea. The United States and its allies will impose strict sanctions against Russia, said US Vice President Joe Biden. Investors were on their toes, and the JPY was a safe haven due to the fears of further escalation in tensions.

The USD/JPY pair has also been hurt by signs of a sharp decline in US Treasury yields, although a sharp increase in demand for the US dollar may limit losses, at least for the time being. In addition, more aggressive response from the Fed to stubbornly high inflation appears to have been killed by the Russia-Ukraine saga. The decline in US bond yields, coupled with the flight to safety worldwide, has further contributed to the strong supply sentiment around USD/JPY.

Further short-term USD/JPY depreciation would likely break below the latter. However, the focus will still be on geopolitical developments as traders await the above-average US GDP report for some momentum.

USD/JPY price technical forecast: Bears eying 114.00 breakout

USD/JPY forecast

The USD/JPY price remains strongly bearish as the recent two price bars have a high spread with a very high volume. The price is declining towards 114.00 area where it may find mild support. The ultimate demand zone lies around 113.40. On the upside, the pair may find resistance around 115.00, acting as a pivot point.

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