FUNDAMENTAL OVERVIEW
USD:
The US dollar weakened
across the board on Monday after Trump told CBS that “the war could be over
soon.” Traders unwound some of their positions as expectations of a quick
resolution led to a repricing of hawkish interest-rate bets, putting pressure
on the greenback.
The dollar extended those
losses yesterday as improved risk sentiment added further downside pressure.
However, the trend reversed in the evening following reports that US
intelligence assets had detected signs Iran may be preparing to deploy mines in
the Strait of Hormuz shipping lane. As the prospects of a quick resolution
faded, US dollar bids returned.
Today, we have the US CPI
report on the agenda. Given the market’s focus on the war, investors will
likely shrug off a softer-than-expected reading, as the data may already be
viewed as outdated. However, a hotter-than-expected report could trigger some
risk aversion. Investors may worry that if inflation was already picking up
before the war began, higher oil prices could push it even higher in the months
ahead.
JPY:
On the JPY side, nothing
has changed as PM Takaichi’s opposition and, more importantly the data, haven’t
been supporting a BoJ rate hike any time soon. The latest Japanese CPI fell
below the BoJ’s 2% target, dealing another blow to the central bank’s efforts
to further raise interest rates.
The selloff in the Nikkei
due to the US-Iran war and the general risk aversion is not helping either as
it could weigh on economic activity the longer it drags on.
The market is still pricing
roughly two rate hikes by year-end which might turn out to be too optimistic. The
Japanese yen will continue to weaken as rate hike expectations get pushed
further out.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDJPY – daily
On the daily chart, we can
see that USDJPY pulled back a bit from the “intervention”
level on some profit-taking. The bullish bias remains intact for now. The
buyers will want to see the price breaking higher to increase the bullish bets into
new highs, while the sellers will continue to step in around the highs to
position for a drop back into the major upward trendline.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDJPY – 4 hour
On the 4 hour chart, we can
see that the price bounced from the 157.65 support where we had also the
confluence of the minor upward trendline. The buyers will likely continue to
lean on the trendline to keep pushing into new highs, while the sellers will look
for a break to pile in for a drop into the major upward trendline next.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDJPY – 1 hour
On the 1 hour chart, we can
see the buyers piled in on the break of the minor downward trendline that was
defining the pullback. We got a little pullback into the 157.90 support before
another impulse to the upside. If the price pulls back again, we can expect the
buyers to step in around the 157.90 support and the trendline to keep pushing
into new highs, while the sellers will need a break below the 157.27 level to
turn the bullish structure into a bearish one, and open the door for new lows. The
red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US CPI report. Tomorrow, we get the latest US Jobless
Claims figures. On Friday, we conclude the week with the US PCE price index,
the University of Michigan Consumer Sentiment survey and the Job Openings data.
As a reminder, the market focus right now is solely on the US-Iran war, so the
data might not matter much.
