USD/JPY Hovers around 156.70 Amid Escalating China-Japan Tensions

The USD/JPY slips by 0.08% and trades in a tight range against the US Dollar on Wednesday. There is no clear direction for the currency pair. Traders are looking for the release of the US Nonfarm Payrolls report on Friday. Apart from this, the US private sector payrolls were released softer than expected. The US private sector added 41000 jobs, versus the market expectations of 47000.

Moreover, the escalating tensions between China and Japan raise the cautious sentiment. China imposes controls on exports to Japan for goods with military use. These tensions would influence the performance of the USD/JPY.

This article explores the latest updates on China-Japan tensions, how they may affect the currency pair, a technical outlook for the USD/JPY, and the key data to watch.

How Recent China–Japan Tensions Impact USD/JPY:

• China expanded its dual-use export control list to over 800 items. These items include chemicals, electronics, sensors, and technologies used in shipping and aerospace.
• China justified this move by referring to last year’s warnings made by Japanese Prime Minister Sanae Takaichi on Taiwan, regarding the potential of military intervention in the Taiwan Strait.
• It’s not easy to exit these tensions because Japan’s security objectives are totally clashing with China’s determination to reclaim Taiwan.
• Analysts described these tensions as “a managed rivalry” rather than a complete breakdown in relations, since both countries still depend on trade and keep diplomatic channels open to manage crises.

In light of these tensions, Japan’s benchmark Nikkei 225 index slipped about 1% on Wednesday. Meanwhile, USD/JPY is trading within a tight range as rising risk-averse sentiment weighs on the market. On the other hand, traders are awaiting the release of the US Nonfarm Payrolls report.

The Technical Outlook for the USD/JPY:

USD/JPY is currently trading within a tight consolidation range, reflecting a balance between buyers and sellers. Price action is capped on the upside by the resistance of 157.29. The downside is being absorbed above the 156.08 support level. This sideways suggests the market is waiting for a catalyst to trigger a clear breakout.

On the upside, a sustained break and daily close above 157.29 could renew the bullish momentum. Then, potentially, it opens the door to reach the next resistance around 157.76. Conversely, a decisive break below 156.08 would weaken the short-term structure and pave the way for a deeper pullback toward lower support levels.

The MACD is hovering close to the zero line, indicating weak momentum and reinforcing the consolidation period. The RSI is around the mid-50 area, which points to neutral conditions. This level reflects neither overbought nor oversold conditions.

Overall, both MACD and RSI align with the view that USD/JPY remains range-bound for now, with a clear directional move likely only after a confirmed break above 157.29 or below 156.08.