Geopolitical Shockwaves Keep USD Bid Strong as USD/JPY Hunts 40-Year Highs

Heightened Middle East tensions and shifting diplomatic signals kept FX markets on edge this week. US strikes on Iranian targets and Iranian retaliations raised geopolitical risk premiums. President Trump’s comments that the memorandum with Iran is over added to uncertainty.

Disruptions in the Strait of Hormuz renewed energy-supply fears. Japan is especially exposed, sourcing most crude from the Middle East. That energy risk, plus much lower Japanese rates versus the US, limits a decisive JPY rally.

Risk-on headlines that Iran “reached out” briefly eased pressure, but volatility remains high. Markets are oscillating between safe-haven flows and risk reprieves, so direction can change quickly.

USD/JPY snapshot: the pair trades near 162.45, close to 40-year highs. The uptrend is supported by interest-rate differentials and safe-haven demand. Momentum favors the upside but readings are stretched.

Key technical levels — support: 161.00–161.50. A break below could expose 160.00 psychological support. Resistance: 162.50–163.00; a sustained break higher would open room for further gains.

Risks: an easing of hostilities could weaken the dollar. Conversely, Japanese policy action or FX intervention would likely trigger a rapid yen rally and push USD/JPY lower. Energy-flow news can also move the market abruptly.

Trading takeaways: bias favors the USD but positions are exposed to sudden shifts. Use breaks and daily closes for confirmation. Keep tight stops and monitor geopolitical and policy headlines closely.