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
USDJPY – daily
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
USDJPY – 4 hour
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
USDJPY – 1 hour
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.
