USD/JPY remains rangebound above the 160.50 support as traders await the US CPI report
USD:
The US dollar has been broadly stronger since last week following renewed
US-Iran escalations. The traffic in the Strait of Hormuz has once again come to
a halt and oil prices started to rise considerably.
This situation triggered a hawkish repricing in interest rate expectations with
chances for a rate hike in July rising back to 33% and the total tightening in
2026 to 39 bps. This week, traders will focus on US-Iran headlines, the US CPI
report tomorrow and Fed Chair Warsh testimony.
Given the escalation in the Middle East, an in line or soft CPI tomorrow
might not have the same effect it could have had without the renewed
geopolitical risk. Nonetheless, we could see the risk sentiment improving with some
minor dovish repricing.
A hotter than expected CPI, on the other hand, will likely trigger strong risk
off across the board on higher chances of a rate hike already in July and the
negative growth outlook stemming from the Middle East situation.
Given these risks, we can expect the market to be either rangebound or
leaning on the defensive side heading into tomorrow’s CPI release.
JPY:
On the JPY side, not much
has changed fundamentally other than the renewed US-Iran escalation. The
Japanese officials threat to target speculators with stealth interventions though
has helped to slow down the depreciation.
The focus remains on the US
CPI report tomorrow which could give the USD/JPY pair a boost in case the data
surprises to the upside or lead to a bigger pullback if the data comes out
lower than expected.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPYis now consolidating above
the 160.50 support zone. From a risk management perspective, the buyers will
continue to have a better risk to reward setup around the support to keep
targeting new highs. The sellers, on the other hand, will look for a break to
pile in for a drop into the major upward trendline around the 158.00 handle.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see we have a minor support zone around the 161.50 level where the price got rejected
from several times in the past days. If we get another pullback, we can expect
the buyers to step in around the support to keep targeting new highs, while the
sellers will look for a break to extend the pullback into the 160.50 support
next.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much else we can add here as from a risk management perspective, the buyers
will have better risk to reward setups around the key supports. The red lines
define the average daily range for today.
UPCOMING CATALYSTS
Today, we have Fed’s Waller
speaking on the Economic Outlook which could offer some further information on
their reaction function. Tomorrow, we get the US CPI report and Fed Chair Warsh
testimony. On Wednesday, we have the US PPI report and the BoC rate decision.
On Thursday, we get the US Retail Sales and Jobless Claims data. On Friday, we
conclude the week with the University of Michigan Consumer Sentiment survey.
This article was written by flfeaa2662d774455a8d50fa77b791ed5f at investinglive.com.