Basic overview
USD:
The US dollar has been gradually rising since Tuesday, as the stalemate between the US and Iran led to some profit-taking on bearish bets on the dollar. There is still no clear sign of holding a second round of talks after Iran refused to send a delegation to Islamabad on Tuesday due to the US blockade in the Strait of Hormuz.
The only good thing keeping everything from getting too vomiting is a ceasefire. Just today, the ceasefire between Israel and Lebanon was extended for another three weeks, and it appears that the ceasefire between the United States and Iran will be open-ended.
On the other hand, everyone was replenishing their military stocks, with the United States sending more ships and military forces to the Middle East. Traders will need to stay smart because things can get ugly very quickly.
Price action remains driven by headlines between the US and Iran, and this is unlikely to change until we get an official decision.
JPY:
On the JPY side, the currency was mostly driven by a stronger and weaker US dollar as Japanese macro conditions continue to point towards a neutral policy. Today, we got the latest CPI report in Japan, and the data did not change anything for the Bank of Japan. Core inflation remains hovering below the 2% target and there is no sign of acceleration that would justify an urgent rate hike.
The US-Iran war not only imposed upward pressure on inflation, but also put downward pressure on growth. The end of the war would certainly be good news for the economy and should lift business sentiment which could eventually translate into favorable conditions for an interest rate hike, but so far we have not had an official decision.
The Bank of Japan will want to wait until the end of the war and let things settle down before considering a rate hike. If the war ends and economic data picks up, it could pave the way for a rate hike in June, although it is still too early.
Technical Analysis of USD/JPY – Daily Time Frame
USD/JPY – Daily
On the daily chart, we can see that USD/JPY It continues to consolidate between the 158.00 support level and the 160.00 handle. If we get another pullback from the recent highs, we can expect buyers to step in again around support with risk identified below it to position for a rally to the 162.00 handle. On the other hand, sellers will want to see the price break down to open the door for a drop to the major uptrend line around the 155.00 level.
Technical analysis of the USD/JPY pair – 4-hour time frame
USD/JPY – 4 hours
On the 4-hour chart, we can see the price breaking above the downtrend line that was defining the bearish momentum at support. The price action between support and trend line formed a descending triangle and this breakout may have opened the door for a move towards the 162.00 handle. Buyers will likely rely on the simple uptrend line outlining current momentum to continue pushing towards new highs, while sellers will want to see the price pull back below the downtrend line to build back up at support.
Technical Analysis of USD/JPY – 1 hour time frame
USD/JPY – 1 hour
On the 1 hour chart, there is not much we can add here as buyers will have a better risk to reward setup around the uptrend line, while sellers will look for downside breakouts to accumulate and target the support area. Red lines define Average daily range For today.
Upcoming stimuli
today We conclude the week with the final consumer confidence report from the University of Michigan, but the focus will remain on the headlines between the United States and Iran.
