USD/JPY is creeping closer to major resistance after a jump today.
It's up 89 pips to 158.95 as the market senses a longer (or at least uncertain) timeline for the war in Iran. Trump continues to say he could end the war soon but the IEA and its members today announced the release of emergency oil stockpiles. That suggests they think the war -- or at least the high oil prices associated with it -- will continue for some time.
Japan has massive reserves of oil that cover more than 200 days of domestic use and will tap into those but refilling them in time with higher-priced oil in a tighter global market could prove costly. In the short-term, rising inflation could also be a headache for the BOJ and the government.
A big part of today's rise is due to the US dollar's broad climb. That's a result of the usual safe-haven demand for the dollar but it's also because the US isn't vulnerable to an oil price shock in the same way as Japan, Europe or the UK as the US has a huge amount of oil production.
Moreover, the market is losing faith that the Federal Reserve will be able to cut rates this year. US 2-year Treasury yields today rose to the highest since September.
On the chart, the high for this year was 159.45, set in January. A short time afterwards, a well-publicized rate check of US banks from Japanese officials set the pair plunging. A second drop came after the Japanese election saw the LDP win a super-majority. Both of those moves have been erased now and the pressure is back on Japanese leaders.
A longer-term chart further emphasizes the importance of this zone near 160.00. The highs of 2024 stretched to 162.00 before a rapid drop. Anything above that would put the pair at 40-year highs.
Surely Japan is lobbying as hard as anyone for a quick end to this conflict.
