The USD/JPY exchange rate climbed back above 159.00 on Thursday as renewed weakness in the Japanese yen combined with a recovery in the US dollar.As of writing, USD/JPY is trading around 159.03, according to the latest chart, after recovering sharply from the August selloff that briefly pushed the pair below 157.00.
The rebound comes as US Treasury yields move higher again following their initial decline after the Treasury Department announced plans to increase buybacks of longer-dated government debt. The US dollar index also recovered toward 98.90 after earlier touching its weakest level since May.
The question for traders now is whether USD/JPY has enough momentum to reclaim 160.00, or whether the current recovery is simply another bounce within the correction from this month’s highs.
Strong US Jobless Claims Support the Dollar
Thursday’s US labor market data provided another reason for traders to buy the dollar. Initial jobless claims fell to 206,000 in the week ended August 15, down from an upwardly revised 212,000 the previous week and below the 210,000 economists had expected. The figures suggest that layoffs remain relatively contained despite concerns following July’s weak payroll report.That matters for USD/JPY because a resilient US labor market gives the Federal Reserve more flexibility to keep interest rates elevated, particularly as policymakers continue to monitor inflation pressures
Long-term Treasury yields have also resumed their rise. The US 10-year yield climbed toward 4.7% on Thursday, while the 30-year yield moved back above 5.2%. Higher US yields tend to support USD/JPY by increasing the yield advantage of dollar-denominated assets relative to the yen.Oil Prices Add Pressure on the Japanese Yen
The other side of the USD/JPY rally is renewed weakness in the yen. Japan remains heavily dependent on imported energy, making the recent surge in oil prices particularly important for the currency. Brent crude climbed above $93 per barrel on Thursday as geopolitical tensions continued to disrupt energy markets.
Japan’s latest trade figures highlight the pressure. Imports jumped 27.8% year over year in July, while exports increased 23.2%. The country nevertheless recorded a Â¥634.5 billion trade deficit. Higher energy import costs can worsen Japan’s terms of trade and increase demand for foreign currencies to pay for imports, creating another headwind for the yen.
The situation leaves USD/JPY caught between two powerful themes: rising US yields supporting the dollar and expectations of further Bank of Japan tightening supporting the yen over the medium term.
USD/JPY Technical Analysis: 159.70 Is the Level to Watch
The daily chart shows USD/JPY attempting to stabilize following the sharp reversal from above 164 earlier this month. The pair currently trades around 159.03, slightly below the Bollinger Band midpoint at approximately 159.46.
That places 159.46 to 159.70 as the first important resistance area. A daily break above 159.70 would strengthen the recovery and could put the psychological 160.00 level back in focus. Above 160.00, the next major resistance visible on the chart sits around 161.85. Reclaiming that level would represent a much stronger technical signal and could reopen the path toward 163.00.
The downside is equally important.
Initial support sits around 157.50, which has repeatedly attracted buyers during the recent volatility. A decisive break below this level could expose the August lows around 156.00.
There is one encouraging signal for USD/JPY bulls. The MACD histogram has moved marginally positive, while the MACD line is beginning to recover above its signal line. However, both remain below zero, suggesting the rebound has improved short-term momentum without fully reversing the recent bearish structure.
USD/JPY Forecast: Can the Dollar Break 160?
The immediate USD/JPY forecast depends heavily on whether buyers can push the pair through the 159.70 to 160.00 resistance zone. A confirmed move above 160.00 could shift attention toward 161.85, while failure at current levels would keep the pair vulnerable to another test of 157.50.
Friday’s Japanese inflation data could provide the next catalyst. Markets will be watching for evidence that inflation remains strong enough to support further Bank of Japan tightening. Preliminary PMI figures from Japan and the US will also provide fresh information on economic activity.
For now, 159.70 is the key upside level for USD/JPY, while 157.50 remains the level bulls need to defend. With Treasury yields, oil prices and central-bank expectations all pulling on the pair, volatility around the 160.00 psychological level could remain elevated.
USD/JPY is rising as the Japanese yen weakens while the US dollar receives support from recovering Treasury yields and stronger-than-expected US jobless claims. Higher oil prices are also creating pressure on the yen because Japan is a major energy importer.
USD/JPY is testing an important technical area around 159.00. A break above 159.70 and 160.00 could open the door toward 161.85, while rejection from this area could send the pair back toward support around 157.50.
Expectations for further Bank of Japan tightening remain an important factor for the yen. Upcoming Japanese CPI data will be closely watched for clues about whether inflation is strong enough to support another rate increase.
