Market Analysis Summary: USD/JPY and Geopolitical Tensions

Author: Elior Manier

Date: March 12, 2026

Overview

The article discusses the current state of the USD/JPY currency pair amidst ongoing geopolitical tensions, particularly the US-Iran-Israel conflict. Despite a recent optimistic US Consumer Price Index (CPI) report, market sentiment is shifting towards concerns about persistent inflation and the potential for a prolonged conflict in the Middle East, which could significantly impact oil prices.

Geopolitical Context

The article highlights a notable change in market expectations regarding the duration of the US-Iran conflict. Odds for a quick resolution have decreased from 80% to 47%, indicating fears of a drawn-out war. The Iranian regime's resilience, exemplified by the appointment of a new leader, has raised concerns about the effectiveness of US strategies in the region.

Impact on Oil Prices

As the conflict continues, oil prices have surged, with the article noting a rally back to $95 per barrel. This increase in oil prices is reminiscent of the oil crises of the 1970s, which preceded the stagflation era in the US. The article warns that such economic trends could have serious implications for the broader market.

Currency Market Dynamics

The USD has strengthened significantly, benefiting from its status as the world's reserve currency and the Petrodollar system. Rate traders have adjusted their expectations, pricing out around 40 basis points of rate cuts since the conflict began. The article notes that the USD has been outperforming other major currencies, particularly the Japanese Yen.

Technical Analysis of USD/JPY

The USD/JPY pair is approaching critical resistance levels, particularly the 160.00 mark. The article suggests that if the pair breaks above this level, it could trigger intervention from the Japanese Ministry of Finance. The Yen has been negatively impacted by rising oil prices and increasing inflation expectations, leading to a significant depreciation against the USD.

Key Levels to Watch

The article provides specific support and resistance levels for traders to monitor:

• Support Levels:
  • 158.10 (Bull Channel Lows)
  • 157.40 to 157.65 (Dec highs Major Pivot)
  • 156.00 (Pivotal Support)
  • 153.50 to 154.00 (Minor Support)
  • 146.00 (August Range Main Support)
• Resistance Levels:
  • 159.420 (Daily and 2026 highs)
  • 159.00 to 159.50 (2026 Major resistance)
  • 160.00 to 160.40 (Major Resistance)
  • 160.70 to 161.00 (Mini resistance)

Conclusion

The article concludes by emphasizing the importance of monitoring geopolitical developments and their impact on oil prices and currency markets. The USD/JPY pair is particularly sensitive to these factors, and traders should remain vigilant as the situation evolves.