FUNDAMENTAL OVERVIEW

USD:

The US dollar has come
under renewed pressure yesterday despite the lack of progress in the US-Iran
negotiations and the Strait of Hormuz closure. What has been weighing on the
greenback to start the week was the news saying that Iran proposed to reopen
the Strait of Hormuz if the US blockade is lifted and then hold nuclear talks
later.

This constant push for a
diplomatic resolution instead of another full-fledged war has been supporting
the risk sentiment on expectations that a deal would be reached eventually. Nonetheless,
the stalemate is causing oil prices to rise, and we are now basically back
around triple digit levels.

Reports are also saying
that Trump is unlikely to accept Iran’s proposal, which might keep the risk
sentiment in check and support the US dollar in the short-term. Overall, we are
now in a consolidation phase until the next major catalyst.

Tomorrow, we have the FOMC
policy decision and although the Fed is expected to keep everything unchanged
amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to
resilient US data and a longer than expected US-Iran war.

A neutral Fed shouldn’t
bring much volatility, but a more hawkish one could give the US dollar a boost
given the recent selloff.

JPY:

On the JPY side, the BoJ
today left interest rates unchanged at 0.75% as widely expected. The quarterly
outlook report showed a significant upward revision for inflation and a
downgrade for growth due to the US-Iran war. The highlight of the decision
though were the three dissenters who voted for a rate hike, which gave the
Japanese yen a short-term boost.

Most of the gains were
pared back as Governor Ueda struck a more measured tone as he noted that they
want to take a little bit more time in gauging how the Middle East situation
would affect Japan’s economy and acknowledged that underlying inflation is
currently a bit below the 2% target.

He added that they expect
underlying inflation to be around 2% from second half 2026 but admitted that he
doesn’t know how many months it would take to gauge timing of their next rate
hike. All in all, the bias for the Japanese Yen remains neutral to bearish.

USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that USDJPY continues to consolidate
between the 158.00 support and the 160.00 handle. If we get another pullback
from the recent highs, we can expect the buyers to step in again around the
support with a defined risk below it to position for a rally into the 162.00
handle. The sellers, on the other hand, will want to see the price breaking
lower to open the door for a drop into the major upward trendline around the
155.00 level.

USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we can
see the price broke the downward trendline and started to consolidate just
above it. We now have another minor downward trendline defining the consolidation.
The sellers will likely continue to lean on it with a defined risk above it to
keep pushing into new lows, while the buyers will look for a break higher to
increase the bullish bets into the 162.00 handle next.

USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, there’s
not much we can add here as the sellers will either look for a rejection around
the minor downward trendline or a break below today’s low, while the buyers
will wait for a break above the trendline to increase the bullish bets into new
highs. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today we get the US Consumer Confidence report. Tomorrow, we have the FOMC
policy decision. On Thursday, we get the US Q1 GDP, the US Employment Cost
Index and the latest US Jobless Claims figures. On Friday, we conclude the week
with the US ISM Manufacturing PMI.