• USD/JPY firmed on Monday as the pair attracted dip-buying as renewed tensions in the Middle East supported demand for the safe-haven dollar.
•Geopolitical risks increased after Yemen’s Houthis reportedly attacked a Saudi refinery and the Red Sea port city of Mocha, raising concerns over potential disruptions to regional energy supplies.
•U.S. crude prices climbed around 1%, providing additional support to the dollar and helping USD/JPY gradually advance to 158.305.
•Despite the yen’s recent rebound, Japan’s fiscal concerns and expectations for only gradual monetary tightening by the Bank of Japan continue to limit sustained JPY gains.
•At the same time, Japan’s recent currency intervention appears to have been aimed primarily at slowing the yen’s decline rather than forcing a sustained appreciation in the currency.
•As a result, intervention risks may limit aggressive USD/JPY gains, but they have not yet created a clear trend reversal.
• Immediate resistance is located at 156.66 (Daily high), any close above will push the pair towards 159.41 (50%fib).
• Support is seen at 157.50 (38.2%fib) and break below could take the pair towards 156.17(Lower BB).
Recommendation: Good to buy around 158.40, with stop loss of 157.50 and target price of 159.30
