FUNDAMENTAL OVERVIEW
USD:
The US dollar weakened across the board on Friday after the US Supreme Court struck down Trump’s reciprocal tariffs. The resulting policy uncertainty is what is likely to have weighed on the greenback, even though nothing has actually changed.
Trump has already imposed new tariffs under a different law and USTR Greer has stated that the tariff deals remain in place and they will be honoured. Moreover, the new levies actually reduce the effective average tariff rate.
The dollar recouped most of the losses yesterday, but it might remain rangebound for now as traders await new catalysts and further developments. The real risks remain a potential US-Iran military escalation which could boost the greenback on severe risk-off mood or a hawkish repricing on stronger US data which would have a positive effect on the USD. Fed’s Waller placed a great deal on next week’s NFP report.
JPY:
On the JPY side, the currency weakened today as Mainichi reported that Prime Minister Takaichi expressed reservations about further rate hikes with BoJ Governor Ueda in their meeting last week.
At the last policy decision, Governor Ueda mentioned that April price behaviour will be a factor to mull over a rate hike, but the data hasn’t been supporting rate hikes at all. In fact, the latest Japanese CPI eased further and the Tokyo CPI on Friday is expected to continue this trend.
The market is expecting the next hike in June at the earliest with a total of 46 bps of tightening seen by year-end (two rate hikes). The Japanese yen will continue to weaken as rate hike expectations get pushed further out.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY extended the gains into the downward trendline today following the Mainichi report. We can expect the sellers to step in around the trendline with a defined risk above it to position for a drop back into the major upward trendline. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the 159.00 handle next.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price is probing above the downward trendline. From a risk management perspective, the buyers will have a better risk to reward setup around the upward trendline to position for a rally into the 159.00 handle. The sellers, on the other hand, will look for a break lower to pile in for a drop into the 152.00 support.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that the price is trading above the upper bound of the average daily range for today. In such instances, we can generally see some consolidation or a pullback before the next move. If do get a pullback, the buyers will likely lean on the minor upward trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to target the next trendline.
UPCOMING CATALYSTS
Today we have the weekly US ADP jobs data. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the Tokyo CPI and the US PPI report. Also, keep watching out for US-Iran headlines.
