FUNDAMENTAL OVERVIEW
USD:
The US dollar has been mostly supported this week amid heightened tensions in the Strait of Hormuz as US and Iran continue to exchange strikes. Despite the expectations for an imminent deal and the reopening of the Strait of Hormuz, we still haven’t got anything officially. There’s just been lots of noise as neither side is down for compromise.
What’s more important for traders is the reopening of the Strait of Hormuz. We are approaching the June FOMC meeting, and after Fed’s Waller speech last week, it’s now almost assured that the Fed is going to abandon the easing bias. If nothing changes before then, we might have a more hawkish than expected decision which is going to reverberate across markets.
Therefore, in the short-term, a resolution and the reopening of the Strait will likely weigh on the greenback on falling oil prices and increased rate cut bets. But if the Strait remains closed for longer and oil prices stay elevated, the risk of the Fed being forced to hike anyway increases.
JPY:
On the JPY side, nothing has changed fundamentally as the macro backdrop remains negative for the yen amid below target inflation and economic headwinds stemming from the US-Iran situation.
As a reminder, the BoJ left interest rates unchanged at 0.75% as widely expected at the last meeting but the highlight of the decision weren’t the three dissenters voting for a rate hike, but Governor Ueda adopting a less hawkish stance.
He mentioned 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 broke out of the consolidation around the 159.00 handle and opened the door for a rally into the 162.00 level next. If we get a pullback into the 158.00 support zone, we can expect the buyers to step in with a defined risk below the support to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to pile in for a drop into the major upward trendline.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the breakout of the consolidation around the 159.00 handle. The price is pulling back now and might retest the broken resistance now turned support around the 159.30 level. We can expect the buyers to step in there with a defined risk below the support to keep pushing into new highs. The sellers, on the other hand, will want to see the price falling back below the support to pile in for a drop into the 158.60 level next.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the buyers will have a better risk to reward setup around the support, while the sellers will need a break below it to extend the pullback into the 158.60 level next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures and the US PCE price index. Tomorrow, we conclude the week with the Tokyo CPI.
