USD/JPY may ultimately continue along the path of least resistance, with underlying fundamentals still favoring the dollar and a favorable risk tone on Monday underpinning yen crosses.

The yen remains defensive amid a combination of elevated oil prices, continued Bank of Japan accommodation, and lingering fiscal concerns tied to expansionary policy. While rising yields have renewed interest in owning JGBs, the steeper yield curve has yet to translate into sustained yen support as the BOJ keeps policy rates anchored near zero. Reports that the BOJ may be increasingly concerned about the growth impact of higher oil linked to the Iran conflict add uncertainty around the prospects for an April rate hike. That conflict itself risks further escalation ahead of President Donald Trump’s Tuesday deadline for potential U.S. strikes.

By contrast, the dollar continues to benefit from inflation concerns and haven demand. As such, USD/JPY risk reversals show little sign of either short-term or longer-term yen support.

Still, USD/JPY is not likely to move sharply higher given intervention risks above 160 and a BOJ policy meeting later this month.

For now, fundamentals argue for the pair remaining in an uptrend. That view could change quickly given elevated convexity. A close below its nearby 21-day moving average at 159.11 and 158 pivot level would help neutralize bullish momentum, shifting focus toward cloud resistance near 155.77.
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(Robert Fullem is a Reuters market analyst. The views expressed are his own.)