FUNDAMENTAL OVERVIEW
USD:
The US dollar regained some ground this week as US and Iran rejected the
respective war-ending proposals and US inflation data came out higher than
expected. Overall, the market remains rangebound as traders continue to wait
for new developments before picking a direction.
Looking ahead, the Fed is slowly abandoning the easing bias with more and
more policymakers talking about the need of keeping all options on the table
and some explicitly bringing up rate hikes.
The reopening of the Strait could weigh on the greenback in the short-term
as oil prices will likely fall quickly and rate cut bets will increase on
easing inflation worries.
After that though, the focus will quickly turn back to the Fed and the
economic data. With the end of the war, the increase in economic activity could
keep inflation higher for longer and eventually even require rate hikes to
bring it sustainably back to the 2% target that the Fed has been missing since
2021.
There’s also another scenario where the Strait remains closed for longer
and oil prices stay elevated, with the risk that the Fed turns hawkish anyway and
gives the greenback a strong boost given the bearish positioning on the dollar.
JPY:
On the JPY side, nothing
has changed fundamentally. Japanese officials have been intervening in the FX market,
but yen sellers have been quick in fading the moves due to the persistently
negative macro backdrop.
The BoJ recently left
interest rates unchanged at 0.75% as widely expected but the highlight of the
decision weren’t the three dissenters voting for a rate hike, but Governor Ueda
adopting a less hawkish stance.
In fact, he noted that they
want to take a little bit more time in gauging how the Middle East situation
would affect Japan’s economy and acknowledged that underlying inflation is
currently a bit below the 2% target.
He added that they expect
underlying inflation to be around 2% from second half of 2026 but admitted that
he doesn’t know how many months it would take to gauge timing of their next
rate hike. This is going to keep weighing on the Japanese yen despite the interventions.
All in all, the bias for the Japanese Yen remains bearish.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPY is now trading at the key
158.00 resistance zone. This is where we can expect the sellers to step in with
a defined risk above the resistance to position for a drop back into the major
trendline. The buyers, on the other hand, will want to see the price breaking
higher to pile in for a rally into the 162.00 handle next.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have an upward trendline defining the bullish momentum. The buyers will likely
continue to lean on the trendline to keep pushing into new highs, while the
sellers will want to see the price breaking lower to pile in for a drop into
the major trendline.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add as the buyers will look for a break above the resistance or
another bounce around the trendline to keep pushing into new highs, while the
sellers will need a break below the trendline to pile in for a pullback into
the 156.50 support
