FUNDAMENTAL OVERVIEW
USD:
The US dollar weakened
across the board on Friday after the US Supreme Court struck down Trump’s
reciprocal tariffs. The resulting policy uncertainty is what is likely to have
weighed on the greenback, even though nothing has actually changed.
Trump has already imposed
new tariffs under a different law and USTR Greer has stated that the tariff
deals remain in place and they will be honoured. Moreover, the new levies
actually reduce the effective average tariff rate.
The dollar recouped most of
the losses yesterday, but it might remain rangebound for now as traders await
new catalysts and further developments. The real risks remain a potential
US-Iran military escalation which could boost the greenback on severe risk-off
mood or a hawkish repricing on stronger US data which would have a positive
effect on the USD. Fed’s Waller placed a great deal on next week’s NFP report.
JPY:
On the JPY side, the currency
weakened today as Mainichi
reported that Prime Minister Takaichi expressed reservations about further
rate hikes with BoJ Governor Ueda in their meeting last week.
At the last policy decision,
Governor Ueda mentioned that April price behaviour will be a factor to mull
over a rate hike, but the data hasn’t been supporting rate hikes at all. In
fact, the latest Japanese CPI eased further and the Tokyo
CPI on Friday is expected to continue this trend.
The market is expecting the
next hike in June at the earliest with a total of 46 bps of tightening seen by
year-end (two rate hikes). The Japanese yen will continue to weaken as rate
hike expectations get pushed further out.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPY extended the gains into the
downward trendline today following the Mainichi report. We can expect the
sellers to step in around the trendline with a defined risk above it to
position for a drop back into the major upward trendline. The buyers, on the
other hand, will look for a break higher to increase the bullish bets into the
159.00 handle next.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see that the price is probing above the downward trendline. From a risk
management perspective, the buyers will have a better risk to reward setup around
the upward trendline to position for a rally into the 159.00 handle. The
sellers, on the other hand, will look for a break lower to pile in for a drop into
the 152.00 support.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see that the price is trading above the upper bound of the average daily range for today. In such instances, we
can generally see some consolidation or a pullback before the next move. If do
get a pullback, the buyers will likely lean on the minor upward trendline with
a defined risk below it to keep pushing into new highs. The sellers, on the
other hand, will look for a break lower to target the next trendline.
UPCOMING CATALYSTS
Today we have the weekly US ADP jobs data. On Thursday, we get the latest
US Jobless Claims figures. On Friday, we conclude the week with the Tokyo CPI
and the US PPI report. Also, keep watching out for US-Iran headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.
