key points:
- Japanese yen rises after more intense verbal intervention
- Japanese Prime Minister Takachi confirms intention to dissolve parliament and hold snap elections
- US dollar remains supported amid potential focus on US-Iran tensions
- Fed members support current patient stance with expectations of rate cut later in the year
fundamental overview
USD:
The US dollar remains supported despite recent soft US core inflation data as market attention remains focused elsewhere. It is interesting to note that the greenback strengthened after the CPI report followed by Trump’s threats against Iran and its strength is understandable given the risk-on inflows we saw subsequently.
Yesterday Trump said that killings are stopping in Iran and there are no plans for executions. The market reacted by selling the dollar, which may be confirmation that all attention is indeed on Iran at the moment. Unfortunately, we got mixed reports after Trump’s comments and ultimately most of the moves faded as the market took a cautious stance.
In terms of monetary policy, traders expect a 54 bps easing by the end of the year. Fed members continue to support the current patient and data-reliant stance. The outlook for USD remains bearish neutral
JPY:
In the case of the JPY, we got a barrage of verbal interventions from Japanese officials yesterday after the price moved above its 2025 high. This helped stem the selloff in the Yen as we got a pullback that eventually escalated following PM Takachi’s confirmation of the imminent dissolution of Parliament to call snap elections in February.
Unfortunately, this may not yet prevent depreciation in the Japanese Yen as fundamentals remain unfavorable for the currency between expansionary fiscal policy and the BOJ’s slow monetary policy normalization keeping real rates in negative territory.
The central bank is still paying close attention to wage growth, so wage data and spring wage talks remain important. The market is pricing in about 40 bps of tightening by the end of the year. The outlook for the JPY remains bearish.
USDJPY Technical Analysis – Daily Time Frame
USDJPY – Daily
On the daily chart, we can see that USDJPY reached its 2025 high around 158.87, but eventually fell below the level after verbal intervention from Japanese authorities. We can expect sellers to make moves around these levels with a defined risk above the high for a decline to the support at 154.50. On the other hand, buyers would like to see the price break above again to extend the rally to the next 160.00 handle.
USDJPY Technical Analysis – 4 Hour Time Frame
USDJPY – 4 hours
On the 4-hour chart, we can see that we have an upward trend line defining bullish momentum. If we get a retracement into the trendline, we can expect buyers to rely on it with a defined risk below it to target new highs. On the other hand, sellers will look for a break lower to pile up for a drop to the next 154.50 support.
USDJPY Technical Analysis – 1 Hour Time Frame
USDJPY – 1 hour
On the 1-hour chart, we can see that the price has broken below the slight uptrend line that was defining the bullish momentum on this time frame. This could be a sign of larger fluctuations in the next major trend line. There is a counter-trend line defining the current consolidation. Buyers will likely rely on it to reach new highs, while sellers will look for a break lower in the key trendline to increase bearish bets. The red lines define the average daily range for today.
upcoming catalyst
Today we got the latest US jobless claims figures.
