USD/JPY Tests Intervention Levels as Gold Drops on US-Iran Optimism

USD/JPY continues to push higher, testing levels historically associated with Japanese intervention, as broad risk-on sentiment drives the dollar higher against safe-haven currencies. The rally comes amid growing optimism surrounding US-Iran diplomatic negotiations, with both sides reportedly close to assembling a framework deal. Gold has dropped to two-month lows as the improved geopolitical outlook reduces demand for safe-haven assets, while WTI crude trades lower on expectations of potential Iranian oil supply returning to markets. Equity markets have extended their rally, with US futures continuing to climb. Fed's Kashkari struck a cautious tone, stating it is far too soon to predict the next policy move, keeping monetary policy uncertainty in play. French consumer sentiment deteriorated further in May, falling to its lowest level since March 2023, adding pressure on the euro. Traders should monitor USD/JPY closely near intervention thresholds, as Japanese authorities have historically stepped in to curb excessive yen weakness. The risk-on environment favors further dollar strength against traditional safe havens in the near term.