<div id="readability-page-1"><div><ul><li>Iran reportedly shuts Hormuz again, threatening Friday’s moves</li><li>USD/JPY still tracking crude moves</li><li>Friday dip bought near key support</li><li>160.46 March high back in focus</li><li>Light data week, headlines matter most</li></ul><h2>USD/JPY Outlook Summary</h2><p>Lower energy prices and the ongoing threat of intervention from the Bank of Japan ensured USD/JPY remained capped beneath recent highs last week. But against the major crosses it was a different story, with diminishing probability of a rate hike from the BoJ later this month seeing the yen weaken to fresh lows against the euro, pound and Aussie. However, with signs of renewed geopolitical tension emerging in the Strait of Hormuz since Friday's close, and with USD/JPY sitting within a structure that hints at an eventual resumption of the prior bullish trend, traders should be alert to the risk of renewed upside pressure as we enter the new trading week.</p><h2>USD/JPY remains an energy trade</h2><p>Japan’s standing as a major net energy importer, the polar opposite of the United States, remains the dominant driver of USD/JPY movements right now. As seen in the correlation matrix below, the positive relationship with Brent and WTI futures remained near extreme levels at 0.85 and 0.95 respectively last week.</p><p><img height="388" src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094010-1.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="699" original-src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094010-1.png"/></p><p>Source: TradingView</p><p>While USD/JPY has also shown a strong correlation with US two and 10-year yield differentials over the past week, rather than being the primary driver, that too reflects how heavily the US interest rate outlook is being influenced by energy price fluctuations. That can be seen in the five-minute tick chart below tracking movements in USD/JPY (black) against WTI crude futures (blue) and US two-year yields (red) over the past fortnight. They are essentially the same trade, underlining how influential developments in the Strait of Hormuz remain when it comes to market performance.</p><p><img height="637" src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094146-2.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1001" original-src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094146-2.png"/></p><p>Source: TradingView</p><p>As such, despite its historical positive relationship with risk appetite, USD/JPY continues to trade with a reasonably strong inverse relationship with the likes of S&amp;P 500 futures, and has seen no meaningful inverse correlation with either US stock or bond market implied volatility measures.</p><p>Forget risk appetite, forget rate differentials. What matters most to USD/JPY right now is where the crude price is heading.</p><h2>Hormuz risks return over weekend</h2><p>The improvement in sentiment seen into Friday’s close has taken a hit over the weekend, with several developments pointing to renewed tension across the Middle East. Iran reportedly reimposed restrictions on vessel traffic through the Strait of Hormuz, reversing the brief optimism that commercial flows may normalise, while there were also reports of attacks involving tankers operating in and around the waterway.</p><p>At the same time, fresh clashes between Israel and Lebanon risk undermining the existing ceasefire agreement and reviving fears of a broader regional conflict. Adding to the unease, there has also been speculation that renewed US bombing could follow if negotiations fail or current arrangements break down, directly challenges the de-escalation narrative that drove the sharp fall in crude prices at the end of last week.</p><p>Clearly, this is a negative development that, if maintained into Monday’s open, could see a significant chunk of Friday’s energy price declines reversed. Based on the correlation analysis above, that would create immediate upside risks for USD/JPY.</p><p>With markets still fixated on developments in the Middle East and this week’s calendar lacking genuine top-tier US data releases, along with no Fed commentary on monetary policy as the blackout period begins ahead of the April FOMC meeting, scheduled event risk looks a distant secondary driver for USD/JPY in the days ahead.</p><h2>Data risk fades behind geopolitics</h2><p><img height="1176" src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094218-3.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1424" original-src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094218-3.png"/></p><p>Source: TradingView</p><p>Retail sales data for March released Tuesday will provide some insight into how consumers responded to surging gasoline and diesel prices during the first full month of the Iran war, making it the headline act for the week given consumption is by far the largest part of the broader US economy. A 1.3% increase in nominal sales is forecast, but what will be far more instructive is the ex-energy measure.</p><p>Outside that release, the calendar is essentially bare, with flash PMIs and jobless claims the only other data worth mentioning. The 20-year Treasury bond auction may attract some eyeballs, but it is a tenor that market participants have traditionally disliked, making it an event that often delivers headlines but far less signal on broader Treasury demand.</p><p>In Japan, the flash PMI reports for April will provide some sense of the impact of the Iran war on the economy, but historically rarely move markets. The same likely applies to the national inflation report for March due Friday in Asia, given it has largely been superseded by the Tokyo CPI release published several weeks earlier.</p><h2>Bull flag keeps upside bias alive</h2><p><img height="637" src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094425-4.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1001" original-src="https://imageproxy.pbkrs.com/https://micms.stonex.com//sites/default/files/inline-images/image-20260419094425-4.png"/></p><p>Source: TradingView</p><p>USD/JPY continues to grind lower beneath 160, although it is obvious from the recent price action that buyers remain willing to step in on meaningful dips when they occur. While not a textbook example, that leaves the pair trading in a structure resembling a bull flag, an extension pattern that warns of the risk of an eventual resumption of the prior bullish trend.</p><p>Friday’s candle may prove particularly instructive, with a retracement to fresh multi-week lows met by a wall of buying ahead of the intersection of flag support and the 50-day moving average, delivering a sizeable reversal for the session despite steep losses in energy markets. It gives the sense that USD/JPY’s sensitivity to downside moves in energy prices is limited right now, helping keep the pair supported just beneath recent highs even with intervention risk from the BoJ and persistent optimism that an eventual lasting peace agreement between the US and Iran will be reached.</p><p>The message from RSI (14) and MACD is largely neutral when it comes to directional risks, with the former continuing to drift lower around the 50 level while the latter eases back towards breakeven after crossing below the signal line. Even with the gradual downtrend seen over the past month, it still feels like risks beyond the short term remain skewed higher.</p><p>Above current levels, 159.30 has acted as both support and resistance over recent weeks, making it a level of note before flag resistance which now sits marginally overhead. A break and close above the latter may encourage fresh bullish interest, initially targeting a retest of the year-to-date high of 160.46 set in March. If that were broken cleanly, the next topside target for bulls would be the 2024 high of 161.95, a level associated with a prior BoJ intervention episode.</p><p>On the downside, the intersection of the 50-day moving average, the March 19 low of 157.52 and flag support provides an appealing entry zone for longs based on the prevailing price action. If that area were to give way, the 100-day moving average, along with minor supports at 156.53 and 155.64, are the levels to watch when assessing short targets or trade setups.</p></div></div>

<p>The USD/JPY outlook is influenced by renewed geopolitical tensions in the Strait of Hormuz, with Iran reportedly restricting vessel traffic again. This has led to a potential resumption of the bullish trend for USD/JPY, which remains closely tied to energy prices. Despite a lack of significant US data releases this week, the market is focused on developments in the Middle East, which could reverse recent declines in energy prices and create upside risks for USD/JPY. Key data to watch includes US retail sales and Japan's flash PMI reports, though they may have limited market impact.</p>

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USD/JPY Weekly Outlook: Hormuz risks may reignite rally