USD/JPY is holding near 158.800: the pair is sensitive to differences in rate expectations between the US and Japan and to overall market sentiment. Reduced concerns about supplies through the Strait of Hormuz have weakened demand for safe-haven instruments, but an unstable news backdrop continues to support interest in the US dollar.
From Japan’s side, the key signal is the Bank of Japan’s stance. The regulator maintains a cautious course: the policy rate remains unchanged, while a slowdown in the pace of bond-buying reductions is being discussed in order to avoid a sharp rise in yields. This approach limits the yen’s strengthening potential but makes its reaction more dependent on global capital flows.
In the US, producer price data came in softer than expected, but rising energy components keep the market in a mode of expecting “longer” high Fed rates. If US yields remain elevated, the dollar retains an advantage; however, if sentiment improves and expectations for policy normalization in Japan strengthen, the yen may recover faster. For today, the baseline remains a pullback scenario for USD/JPY to the downside. The risk is a new spike in tensions and a stronger dollar.
Trade recommendation: SELL 158.950, SL 159.150, TP 158.000