FUNDAMENTAL OVERVIEW
USD:
The US dollar strengthened yesterday after Iran rejected the proposed ceasefire and outlined its own conditions that included closure of all US bases in the Gulf, reparations for the attacks, lifting of all sanctions and allowing Iran to retain its missile program without restrictions.
These conditions are of course unacceptable for the US, so we are now in a deadlock. For now, the US dollar is likely to remain supported until there is an official de-escalation.
JPY:
On the JPY side, nothing has changed as lack of progress on the inflation front and geopolitical risks will likely keep weighing on the currency. The latest Japanese CPI report showed further easing in inflation with the Core figure falling well below the BoJ’s 2% target.
The BoJ today has announced that it will begin publishing data on the estimated core consumer price inflation rate but even their estimates are not really calling for immediate action.
On the wage growth side, the initial outcome of the spring wage negotiations points to a third straight fiscal year in which Japan sees average wage hikes of above 5%. This should keep the tightening bias intact, but the central bank might want to wait for the US-Iran war to end to avoid exacerbating growth fears.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY bounced on the 157.65 support and it’s now approaching the resistance around the 160.00 handle. The buyers continue to target the 161.95 level, but a break above the 160.00 level is needed to open the door for higher prices. There’s not much else we can glean from this timeframe, so we need to zoom in to see some more details.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the consolidation between the 157.65 support and the 159.75 resistance. We can expect the sellers to step in around the resistance with a defined risk above it to position for a drop back into the support. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor upward trendline defining the bullish momentum on this timeframe. If we get a pullback, we can expect the buyers to lean on the trendline with a defined risk below it to keep pushing into new highs, while the sellers will look for a break lower to pile in for a drop into the 157.65 support next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures.
