FUNDAMENTAL OVERVIEW
USD:
The US dollar skyrocketed in the final part of last week as prospects of a quick end to the war faded and oil resumed the rally towards triple digit levels. Traders continue to price out the rate cut bets amid surging energy prices.
On Wednesday, we have the FOMC policy decision where the central bank is expected to keep interest rates unchanged with Miran, Waller and Bowman likely dissenting in favour of a rate cut. At this meeting, we will also get the Summary of Economic Projections and the Dot Plot.
The Fed is likely to revise growth forecasts lower, while upgrading inflation estimates. The median Dot Plot should remain unchanged with one rate cut expected by year-end. Overall, the central bank is likely to stress patience amid the US-Iran war but maintain an easing bias.
JPY:
On the JPY side, nothing has changed but it’s interesting to see the lack of strong verbal intervention like we’ve seen back in January. The Japanese Minister of Finance Katayama did warn that they are ready to take decisive steps if needed, but other than that we haven’t got anything of substance.
This week, we also have the BoJ policy decision on Thursday, but the central bank is expected to keep everything unchanged given the lack of support from Prime Minister Takaichi and especially from the economic data.
A BoJ rate hike in the current context would just exacerbate growth fears and add more pressure on the stock market and economic activity.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY broke above the “intervention” level and it’s now trading at the highest level since 2024. The buyers will likely continue to target the cycle high around the 162.00 handle unless Japanese officials intervene, the BoJ hikes or Trump puts an end to the US-Iran conflict.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have an upward trendline defining the bullish momentum. If we get a pullback into the trendline, we can expect the buyers to lean on the trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will need the price to break lower to pile in for a drop into the 157.00 handle 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 trendline, while the sellers will need a breakout to open the door for new lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday we have the US PPI report and the FOMC policy decision. On Thursday, we have the BoJ policy decision and the latest US Jobless Claims figures. The focus remains on the US-Iran war, so keep an eye on the headlines, especially those regarding the Strait of Hormuz.
