The yen recovered earlier losses to trade marginally firmer against the US dollar in European hours, with USD/JPY down 0.2% near 157.00. The move followed a sharp correction in oil prices on renewed expectations of US–Iran diplomacy: an Iranian official said a proposal was delivered to the US via mediators on 16 September, and it envisages reopening the Strait of Hormuz—through which almost 20% of global energy supply passes—within seven days if the US takes initial steps to ease military pressure. Separately, plans for Saudi Arabia to resume crude exports from Yanbu as early as Tuesday and restart the East-West oil pipeline added to supply hopes, a backdrop that tends to support oil-importing currencies such as the yen.
Monetary policy remained in focus as the Bank of Japan is expected to deliver further interest-rate rises this year after two hikes already in 2026. In the US, softer oil prices weighed on the dollar’s safe-haven demand, pushing the Dollar Index down from an earlier 52-day peak of 100.67. On charts, USD/JPY was at 156.96, holding above the 20-period EMA at 156.63, while RSI at 49.57 suggested neutral momentum following the pullback from the 160.00 area. Support is flagged at 156.63, with 156.96 described as an intraday pivot.
Strategic Trading Recommendations for USD/JPY and the Yen
We advise derivative traders to closely watch the 156.63 support level on the USD/JPY pair over the coming weeks. If the price breaks decisively below this 20-day exponential moving average, we recommend buying near-the-money put options to capitalize on a deeper slide toward 150.00. This approach limits risk while positioning us for a potential Yen rally driven by easing global oil pressures.
We must also look at the Bank of Japan’s shifting monetary policy, where economists now project benchmark interest rates could climb toward 1.0% in the coming cycles. Historically, even minor policy shifts, like the BoJ’s rate hike to 0.25% in July 2024, triggered massive short-covering that boosted the Yen by over 10% against the dollar in just a few weeks. Given the rising likelihood of steady rate hikes every three months, we believe holding long-Yen futures positions is a highly viable strategy.
Energy, Market Signals and Options Hedging
Falling energy costs continue to support our bullish outlook on the Japanese currency. Since Japan imports roughly 90% of its energy needs, Brent crude’s recent slide toward $70 a barrel significantly reduces the country’s trade deficit. We suggest using energy-linked FX derivatives to hedge against these shifting import dynamics.
Finally, the daily Relative Strength Index is sitting at a very neutral 49.57, showing that the market is currently waiting for a clear spark. To trade this indecision, we recommend deploying options straddles to capture profits from a sudden expansion in volatility. This setup ensures we are prepared whether USD/JPY surges back toward 160.00 or breaks down past 155.00.
