Japanese Yen Recovers from Three-Week Low vs USD Amid Looming Intervention Risk

The Japanese Yen (JPY) has recovered from its three-week low against the US Dollar (USD), but intervention risk remains on the table. The USD/JPY pair is trading just above mid-158.00s, down around 0.20% for the day.

Earlier this week, the pair reached a three-week high near 159.00, but it has since stalled and drifted lower during the Asian session on Friday. The interest rate gap between the US and Japan remains wide, at roughly 250 to 275 basis points (bps), which should continue to support the USD/JPY pair.

The recent strong move up to a nearly two-month high in the USD has paused for a breather, prompting bullish traders to take some profits off the table. The US and Iran are reportedly exploring a phased deal to reopen the Strait of Hormuz, but geopolitical risks remain elevated due to ongoing Houthi missile attacks on Saudi Arabia.

Traders now look to the US macro data and Fed speeches for some impetus heading into the weekend. Technical analysis suggests that the USD/JPY pair maintains a bullish near-term bias following the overnight breakout above the 200-period Simple Moving Average (SMA) on the 4-hour chart.