USD/JPY stays bid despite more hawkish BoJ’s Ueda comments and imminent rate hike report
FUNDAMENTAL OVERVIEW
USD:
The US dollar has been mostly rangebound for the past months with bouts of weakness on positive US-Iran headlines, and strength on negative developments. This week, the greenback has been supported by renewed tensions in the Middle East as US and Iran exchanged fire once again, with Iran even attacking US bases in the Gulf.
The most important thing is the fact that the negotiating stalemate continues to extend, and the reopening of the Strait of Hormuz is moving further and further away compared to previous expectations.
The signal is that nobody wants to restart the war, which is good, but the Strait of Hormuz will remain closed until there’s a deal. Trump looks in no hurry whatsoever with the stock market trading at record highs and he recently even said that the Strait could remain closed through Labor Day, which is in September. That’s going to keep oil prices persistently elevated.
We are approaching the June FOMC meeting and it’s now almost assured that the Fed is going to abandon the easing bias. If nothing changes before then, we might get a more hawkish than expected decision which could reverberate across markets and give the US dollar a strong boost.
Therefore, in the short-term, a resolution and the reopening of the Strait will likely weigh on the greenback on falling oil prices and increased rate cut bets. But if the Strait remains closed for longer and oil prices stay elevated, the risk of the Fed being forced to hike anyway increases, which should keep supporting the greenback.
JPY:
On the JPY side, BoJ Governor Ueda yesterday delivered slightly more hawkish comments as he stressed a few times that acting too late on inflation could eventually require a stronger response and risk a significant economic slowdown.
Today, we got a Reuters report citing three sources that the BoJ is expected to hike rates at the upcoming meeting in June barring sharp escalation in the Middle East. The report also added that the central bank is also leaning towards pausing or slowing the pace of its bond tapering program for the upcoming fiscal year.
The Japanese yen hasn’t reacted to the news because the market was already pricing in 70% chance of a rate hike, which has now rose to 82%, and the more dovish tapering plan removes some of the hawkishness from the decision.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY continues to slowly edge higher and it’s getting closer to erase the entire drop since April. The natural target should be the cycle high around the 162.00 handle. If we get there, we can expect the sellers to step in with a defined risk above the cycle high to position for a correction into the major trendline. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a trendline defining the bullish momentum. The buyers will likely continue to lean on the 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 pile in for a drop into the 158.00 support zone.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as from a risk management perspective, the buyers will have a better risk to reward setup around the trendline, while the sellers will need to wait for a break to open the door for new lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we get the latest US Jobless Claims figures. Tomorrow, we conclude the week with the Japanese wage data and the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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