USD/JPY rebounded and rose towards a four-day high near 157.80, after comments from US Treasury Secretary Scott Bessent about undesirable FX volatility. At the time of writing, the pair was up by over 0.30%.
The technical view is neutral to downward after Bank of Japan action on 30 April limited moves towards 158.00. The Relative Strength Index remains bearish but is moving higher.
Upside Break Levels
A break above 158.00 would open resistance at the 50-day Simple Moving Average of 158.71, then 159.00. Further up, 160.00 is also noted as a level where Japanese authorities may respond.
If 158.00 holds, attention stays on support at 157.00. A drop below 157.00 could expose 156.51 (11 May low) and 156.02 (7 May low).
The yen is influenced by Japan’s economy, Bank of Japan policy, the gap between US and Japanese bond yields, and market risk sentiment. Ultra-loose BoJ policy from 2013 to 2024 weakened the yen, while policy unwinding in 2024 has supported it and narrowed the 10-year yield gap.
The pair is moving back toward 158.00, which we see as a critical test for bulls. This upward pressure is fundamentally supported by the significant interest rate gap between the US and Japan. The US 10-year Treasury yield is holding firm above 4.1%, keeping the spread over Japanese bonds at a compelling 310 basis points.
Intervention Risk Watch
For those expecting a break higher, buying call options with a strike price above 158.00 is a direct way to play the momentum. A successful push could target the 50-day moving average near 158.71, but we must remember the sharp interventions we saw back in October 2025 when the pair tried to move past 162.00. The risk of official action is very real at these levels.
The memory of the Bank of Japan’s intervention just two weeks ago on April 30 is making many traders nervous about getting too aggressive. If buying pressure fades before the 158.00 mark, we expect a slide back toward the 157.00 support zone. This scenario would favor buying put options to protect against, or profit from, such a downturn.
Given the clear risk of government intervention near the 159.00-160.00 levels, implied volatility on JPY options is elevated. This makes buying options more expensive, so traders should consider using spreads, like bull call spreads or bear put spreads, to lower the cost of entry. Selling volatility outright is extremely risky until we get a clearer policy signal.
The broader economic picture supports this tension. The latest US CPI report for April showed inflation remains stubborn at 2.9%, making the Federal Reserve hesitant to cut rates. Meanwhile, Japan’s own core inflation has held at 2.5%, giving the Bank of Japan justification to slowly continue normalizing its monetary policy.
