USD:
The US dollar has been under pressure in the past few days following the
surprisingly soft US inflation figures. The data triggered a dovish repricing
in interest rate expectations with traders scaling back significantly the
probabilities for a rate hike in July which is now comfortably off the table.
The Fed is now expected to raise interest rates in October at the earliest
with a fully priced hike in December. The US-Iran crisis in the background is
keeping inflation risks skewed to the upside, so the downside in the greenback
should remain limited without a clear de-escalation.
JPY:
On the JPY side, not much
has changed fundamentally other than the renewed US-Iran conflict and the
closure of the Strait of Hormuz that is keeping oil prices more elevated and
reigniting inflation and growth worries.
The Japanese officials
threat to target speculators with stealth interventions has helped to slow down
the depreciation, but that might not stop the yen from falling into new lows
versus the US dollar if the current US-Iran situation drags on for much longer or
even worsens.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPYcontinues to consolidate
below the cycle high around the 162.85 level with a bullish tilt. If the price
reaches the cycle high, we can expect the sellers to step in with a defined
risk above it to position for a drop back into the 160.50 support. The buyers,
on the other hand, will look for a break to increase the bullish bets into new
highs.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see the recent price action might have formed an ascending triangle and the
series of higher lows suggests the bullish bias remains intact. 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 extend the pullback into the 161.50
support next.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the price is trading right in the middle of the key
levels. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we conclude the
week with the University of Michigan Consumer Sentiment survey, but the focus
will remain on US-Iran headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.