Basic Overview
USD:
The US dollar has been on a gradual rise since Tuesday, largely because the ongoing US-Iran tensions have led to profit-taking on expectations of a weaker dollar. There’s still no indication that further talks will take place after Iran declined to send a delegation to Islamabad on Tuesday, pointing to the US blockade of the Strait of Hormuz as a reason.
A truce is perhaps the only thing that can prevent a further downturn. Today, the ceasefire between Israel and Lebanon has been extended for another three weeks, and it seems the US-Iran ceasefire may be open-ended.
In the meantime, the US is bolstering its military presence in the Middle East, with additional ships and troops being deployed, while everyone seems to be restocking military supplies. The situation requires traders to stay nimble, as things can quickly take a turn for the worse.
Price movements remain influenced by developments in the US and Iran, and it appears this trend will persist until a formal resolution is accomplished.
JPY:
As for the Japanese yen, its performance is largely dictated by the strength and weakness of the US dollar, while Japan’s economic situation is still leaning toward a neutral policy. The recent Japanese CPI report didn’t change much; core inflation is still below the 2% target, and there’s no indication of a spike that would warrant an emergency rate increase.
The conflict between the US and Iran is adding upward pressure on inflation but also weighing down growth. Naturally, if the war were to end, it could be beneficial for business sentiment, possibly paving the way for favorable conditions to consider rate hikes, but there’s no established resolution yet.
The Bank of Japan is likely to wait until the conflict settles before thinking about raising interest rates. Should the fighting cease and economic indicators improve, there might be a foundation for a rate hike in June, though that still seems like a long shot right now.
USDJPY Technical Analysis – Daily Time Frame
Reviewing the daily chart, the USDJPY continues to consolidate between the 158.00 support and the 160.00 mark. A rebound from recent highs could see buyers stepping in at support again, but there’s also a significant risk of breaking below that support, which might prompt a move toward 162.00. Conversely, sellers may hope to break beneath and target a decline to the main uptrend line near 155.00.
USDJPY Technical Analysis – 4 Hour Time Frame
On the four-hour chart, we notice that the price has surpassed the downtrend line, which had characterized the bearish momentum toward support. The price action has formed a descending triangle, and this breakout could potentially pave the way for a move toward 162.00. Buyers seem likely to depend on a smaller uptrend line to maintain momentum for new highs, while sellers will be eyeing a break below the downtrend line as an opportunity to return to support.
USDJPY Technical Analysis – 1 Hour Time Frame
The hourly chart doesn’t reveal much new information; buyers are somewhat at risk given the uptrend line. Meanwhile, sellers are looking for a downside break, eyeing the support zone for potential targets. The red line reflects today’s average daily range.
Future Catalyst
As the week wraps up, we await the final University of Michigan Consumer Sentiment Report, but the spotlight remains on the evolving situation between the US and Iran.
