USD/JPY Price Forecast: Likely to extend rally towards 164.00

The Japanese Yen (JPY) hovers near a multi-decade high at around 163.24 against the US Dollar (USD) during the early European trading session on Wednesday. The USD/JPY pair reflects significant strength as the Japanese currency underperforms due to surging Oil prices.

Oil prices have increased further as global energy supply risks have escalated due to the closure of the Bab el-Mandeb Strait by Yemen’s Iran-aligned Houthis.

Higher oil prices bode poorly for currencies from economies, such as Japan, which rely heavily on energy imports.

Sheer weakness in the Japanese Yen has increased hopes of Japan’s intervention in the FX market. Earlier in the day, Japan’s Finance Minister (FM) Satsuki Katayama said that the authorities will take necessary steps on the foreign exchange if necessary. However, she declined to comment on specific forex levels.

Going forward, investors will focus on Japan's National Consumer Price Index (CPI) data for June, which will be released on Friday.

USD/JPY technical analysis

Bias: USD/JPY trades firmly at around 163.20 at press time. The overall bias is bullish as the 20-day Exponential Moving Average (EMA) slopes higher at around 162.15 and the reclaimed upward support trend line around 162.16, which both now underpin the bullish near-term bias.

Momentum: The Relative Strength Index (14) stands at 65.94, staying in positive territory just shy of classic overbought thresholds and suggesting that upside momentum remains constructive, though increasingly stretched.

Pattern: There is a Rising Wedge formation on the daily chart, which generally leads to a bearish reversal after a strong rally. However, the pair could extend the rally if it breaks the chart pattern on the upside above the upper border, which is around 163.50.

Resistance: USD/JPY could extend its advance towards 164.00 once it breaks above the immediate hurdle of 163.50.

Support: On the downside, initial support is clustered in the 162.15–162.16 area, where the 20-day EMA and the former breakout point of the rising trend line converge as a key demand zone before any deeper correction can develop.