USD/JPY rose on Wednesday and moved back above 159.00. The move partly reversed a 0.5% fall over the previous two days.
The US dollar made modest gains against major currencies as markets assessed mixed reports about Iran related negotiations. US President Trump said the war could end “very soon”, after comments that US and Iran delegations may return to talks in the coming days.
The Associated Press reported that mediators are nearing an extension of a two-week ceasefire that expires next week. Earlier, the US military said a blockade of the Strait of Hormuz had been “fully implemented”, which Iran called “illegal and amounting to piracy”.
The Washington Post reported that the US administration is considering sending thousands of additional troops to the Middle East. United Overseas Bank analysts said USD/JPY slipped below 158.70 on Tuesday and touched 158.59, and they pointed to 158.50 and 158.00 as possible next levels while noting resistance at 159.50.
A correction on April 15 at 12:14 GMT changed the pair name to USD/JPY from USD/JPI.
The contradictory news coming out of Washington regarding the Iran situation creates a perfect environment for higher volatility in USD/JPY. This uncertainty is reflected in the options market, where the Cboe/CME FX Yen Volatility Index (JYVIX) has already risen over 10% in the last two weeks to a six-month high of 11.8. Traders should anticipate sharp price swings rather than a clear, steady trend in the immediate future.
Given the risk of a sudden move, traders can use options to profit from a breakout in either direction instead of gambling on one outcome. A long straddle, which involves buying both a call and a put option at the same strike price, is a viable strategy here. This position will become profitable if the pair moves significantly away from its current 159.00 level, regardless of whether a peace deal or military escalation is the cause.
We saw a similar pattern play out in early 2025 when tensions in the South China Sea flared up, causing wild swings in currency markets. Those who were positioned for a large move, rather than a specific direction, were the ones who profited from the uncertainty. The current situation with the Strait of Hormuz blockade feels much the same, where headlines can turn the market on a dime.
The technical levels of 159.50 as resistance and 158.00 as support are the key triggers to watch. A decisive break of these boundaries could signal the next major leg, making them practical strike prices for setting up volatility trades. This geopolitical risk is happening while the latest US inflation data from last week showed core CPI remaining stubbornly above 3%, reinforcing the Federal Reserve’s wide policy gap with the Bank of Japan.
