FUNDAMENTAL OVERVIEW
USD:
The US dollar opened the
week higher yesterday following the breakdown of US-Iran negotiations over the
weekend. The gains didn’t extend further though as the ceasefire remained
intact and we got reports of US and Iran continuing to exchange messages
through diplomatic backchannels.
There were still risks of
another escalation after Trump decided to put pressure on Iran by blockading
their ports, but everything turned around in the first part of the US session
as we started to get positive headlines and the greenback sold off across the
board.
In fact, we got the first
boost to risk sentiment after the New York Post reported that Iranian officials
were studying abandoning uranium enrichment as a US condition for ending the
war. The moves then extended as we got further reports confirming the ongoing
negotiations between US and Iran and finally a second round of talks was set
for this weekend.
JPY:
On the JPY side, the
currency has been mostly driven by US dollar strength and weakness as Japanese
macro conditions continue to point towards a neutral policy. In fact, despite
the growing expectations of a rate hike at the upcoming meeting, inflation in
Japan has been gradually easing with most metrics being near or below the 2%
target.
Moreover, the US-Iran war
hasn’t only put upward pressure on inflation but also downward pressure on
growth. The end of the war would certainly be good news for the economy and
should lift business sentiment which might eventually translate into favourable
conditions for a rate hike.
For now, the BoJ is more
likely to hold rates steady and let things settle after the conclusion of the
war. What the BoJ could do at the April meeting is to lay the groundwork for a
rate hike in June if they think they have the right conditions in place.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDJPY – daily
On the daily chart, we can
see that USDJPY bounced around the 158.00
handle and almost reached the 160.00 level before retracing. The recent
consolidation might have formed a head and shoulders pattern with the neckline around
the 158.00 support. If the price falls back to the support, we can expect the
buyers to step in with a defined risk below the support to position for a rally
into the 162.00 handle. The sellers, on the other hand, will look for a break
to pile in for a drop into the 155.00 level next.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDJPY – 4 hour
On the 4 hour chart, we can
see the price rejected the downward trendline near the 160.00 handle and
eventually broke below the upward trendline that was defining the pullback. The
sellers stepped in around the downward trendline and increase the bearish bets
on the break of the upward trendline targeting the 158.00 support. If we get
another pullback into the downward trendline, we can expect the sellers to lean
on it to keep pushing into new lows, while the buyers will look for a break to
pile in for a rally into the 162.00 handle.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDJPY – 1 hour
On the 1 hour chart, we don’t
have clear levels where to lean on other than the resistance around the 159.40
level. If the price gets there, we can expect the sellers to step in with a defined
risk above the trendline in case the pullback extends and target the 158.00
support. The buyers, on the other hand, will look for upside breaks to pile in
for a rally into new highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US PPI report. On Thursday, we get the latest US Jobless
Claims figures. The focus remains on US-Iran headlines.
