FUNDAMENTAL OVERVIEW
USD:
The US dollar pulled back
across the board in the first part of the week on what looks like profit-taking
from extreme levels rather than a change in fundamentals as we haven’t got any
meaningful catalyst to trigger a reversal yet.
The focus remains on the US-Iran
war as a prolonged conflict could keep the greenback supported. Conversely, a
de-escalation should trigger a relief rally in the markets and weigh on the US
dollar.
Today, we also have the
FOMC rate decision where the central bank is expected to keep interest rates
unchanged at 3.50-3.75% and take a “wait and see” approach amid the
US-Iran war. At this meeting, we will also get the Summary of Economic
Projections (SEP) and the Dot Plot.
Inflation and unemployment
will likely be revised upwards, while growth forecasts might be downgraded. The
Dot Plot should still indicate just one rate cut in 2026.
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 as rate hike bets continue to be pushed
further out.
Tomorrow, we have the BoJ
rate decision where the central bank is expected to keep interest rates unchanged
at 0.75%. BoJ Governor Ueda is unlikely to offer much in terms of forward
guidance and just repeat the usual pledge to keep raising rates if the economic
outlook is realised.
Traders will also focus on
comments on the Japanese yen which recently fell to a two-year low against the
US dollar. In 2024, the JPY weakness played a major role in one of their rate
hike decisions, so the market will be attentive to signals whether that could
happen again.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDJPY – daily
On the daily chart, we can
see that USDJPY pulled back a bit from the
highs but maintains the bullish bias. There’s not much we can glean from this timeframe,
so we need to zoom in to see some more details.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDJPY – 4 hour
On the 4 hour chart, we can
see the price broke below the upward trendline that was defining the bullish
momentum on this timeframe. We have a minor downward trendline defining the
recent pullback. The sellers will likely lean on the downward trendline with a
defined risk above it and position for a drop into the 157.00 handle. The
buyers, on the other hand, will look for a break higher to pile in for a rally
into the 160.00 handle 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 sellers will look for a rejection around the
downward trendline, while the buyers will look for a breakout. The red lines
define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US PPI report and the FOMC policy decision. Tomorrow, 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.