USDJPY SHORT SETUP — UPDATE (April 17)
Here’s my updated thought process after today’s sharp move:
The pair dropped noticeably today, hitting lows around the 157.70 – 158.10 zone before settling near 158.2. This continues the pressure we’ve been watching. So, from my short entry at 160, I’m currently up roughly 230 pips and price is pushing deeper into the blue zone.
What triggered today’s drop?
Iran announced that the Strait of Hormuz is completely open for commercial shipping for the remainder of the ceasefire. President Trump amplified it on Truth Social, confirming the passage is “fully open and ready for full passage.” This removes a major supply disruption risk that had supported oil prices and safe-haven dollar demand. Oil prices plunged in response (building on the earlier 16%+ drop post-ceasefire), risk-on sentiment strengthened globally, safe-haven flows reversed, and the dollar weakened across the board, adding fresh downside pressure to USDJPY.
This reinforces the original April 8 setup: the ceasefire (and now its confirmation via the reopened strait) is driving dollar selling and yen strength. Not only dollar selling, but oil prices too. Remember, increased supply = lower price and vice versa.
But also remember, the market is just reacting to the news at the moment. It will take a while before the prices fully take effect in your local markets (if the strait remains open).
The bigger picture remains intact
• Japanese Finance Minister, Satsuki Katayama continues issuing strong warnings around the 160 level; the exact zone that triggered intervention back in July 2024. She has reiterated readiness for “bold action” after talks with the U. S. Treasury, keeping intervention risk high and 160 as Japan’s clear line in the sand.
• The Bank of Japan stays in its rate-hiking cycle (policy rate at 0.75%, highest in 30 years). While the April 27-28 meeting may now deliver no hike due to ongoing regional uncertainty, markets still expect further tightening ahead (June widely priced in). Higher rates continue eroding the interest rate differential that supported USDJPY for years.
• Yen carry trade unwind: The roughly $500 billion in outstanding positions (per JP Morgan’s earlier estimate) hasn’t disappeared. Every BOJ step higher makes yen borrowing more expensive, pushing more unwinds = increased yen buying and dollar selling pressure.
What do I think is happening?
The MOF’s defense of the 160 region + BOJ tightening bias + fresh dollar weakness from the reopened Strait of Hormuz and reinforced ceasefire = ongoing confluence supporting the USDJPY short trade.
Today’s sharp move shows this pressure is actively playing out, even if it remains choppy rather than a straight crash.
My target?
A retracement toward the 150–145 zone over the coming months still looks plausible as the BOJ cycle progresses and the ceasefire holds (removing the oil/dollar bid). That area has historically acted as a demand zone and potential buy area for USDJPY longs once the dust settles.
⚠️ This is purely my own analysis and thinking. I can be wrong!
Macro setups can reverse fast, especially if the ceasefire breaks down, oil spikes again, or geopolitics shift suddenly. The situation remains fragile.
Please engage this with your own sound technical analysis, proper risk management, and position sizing you’re comfortable with.
Basically, do your own research!!!
