USD/JPY Falls After Strait of Hormuz Reopens

On April 17, USD/JPY declined following a pullback in oil prices and announcements that the Strait of Hormuz had reopened after a period of disruption. Statements from U.S. and Iranian officials and a push by the U.S. administration advanced negotiations, removing an immediate chokepoint for a large share of Asian crude imports.

Iran’s capture of the strait on Feb. 27 had led to sustained supply restrictions. Energy commodity prices more than doubled during the disruption, with WTI and Brent at times rising over 100% from pre-crisis levels and remaining about 35% above early February prices before the reopening. Jet fuel and refined product costs in Asia and Europe climbed sharply, increasing costs for fuel-dependent industries in the region.

Japan relies heavily on imported crude and refined products. The country holds the world’s largest proven strategic oil reserves, which provided some buffer against higher prices. The yen had been under pressure earlier this year after expectations for additional Bank of Japan tightening receded amid slower inflation and mixed signals from policymakers, leaving USD/JPY exposed when energy prices spiked.

OANDA market analyst Elior Manier wrote that USD/JPY has entered a corrective phase and was testing the 50-day moving average near 157.60, with the daily relative strength index turning bearish. On the four-hour chart, buyers re-entered close to the March 19 lows at 157.533 while the short-term RSI approached oversold levels.

Technical patterns include a developing head-and-shoulders formation with a measured target near 155.00 if the pair breaks below recent morning lows. Immediate resistance is clustered between about 158.50 and 159.50, with a larger barrier near 160.00 to 160.40. Support levels include the March lows around 157.53, the four-hour 200-period moving average near 156.49 and a zone around 156.00.

Correlation between WTI crude and USD/JPY tightened during the supply disruption, with oil acting as a driver of dollar strength as markets priced persistent interruptions. After the Strait reopened and crude eased, that correlation weakened. Market participants are watching oil flows and follow-up diplomatic developments for signs of further changes in supply expectations and currency prices.