Key Moments
- The US dollar weakened at first after comments suggested “the war could be over soon.” It then rebounded as geopolitical tensions returned.
- Japanese inflation fell below the BoJ’s 2% target. This reduced expectations for near-term rate hikes and put pressure on the yen.
- USD/JPY is near key resistance levels. Buyers are defending trendlines on daily, 4-hour, and 1-hour charts.
Fundamental Overview
The US dollar started the week under pressure. On Monday, Trump told CBS that “the war could be over soon.” As a result, traders unwound long dollar positions. A faster resolution drove a reassessment of hawkish interest-rate expectations and softened demand for the greenback.
The currency declined further yesterday as risk appetite improved. Later, reports indicated that US intelligence detected signs Iran might deploy mines in the Strait of Hormuz. Optimism about a quick end to the conflict faded, and demand for the US dollar returned.
Today’s focus is on the US CPI release. Investors may downplay weaker-than-expected data, seeing it as backward-looking. However, stronger CPI figures could unsettle risk sentiment. Markets may worry that rising oil prices could push inflation higher in the coming months.
Japanese Yen Under Pressure
The yen remains under pressure. PM Takaichi’s opposition and incoming data do not support a near-term BoJ rate hike. The latest Japanese CPI reading fell below the BoJ’s 2% target, creating another challenge for the central bank.
Equity market weakness adds strain. The Nikkei selloff linked to the US-Iran war and broader risk aversion could drag on economic activity.
Markets still price in roughly two BoJ rate hikes by year-end. This may prove too aggressive. If expectations for tightening are pushed further out, the yen is likely to stay weak.
USD/JPY Technical Picture – Daily Chart
On the daily chart, USD/JPY eased slightly from the “intervention” zone due to profit-taking. Nevertheless, the overall bullish bias remains intact.
Buyers are waiting for a decisive move to new highs to strengthen the upward narrative. Sellers are expected to fade strength near recent peaks, aiming for a pullback toward the major trendline.
USD/JPY Technical Picture – 4-Hour Chart
The 4-hour chart shows the pair rebounding from support at 157.65. This level also aligns with a minor upward trendline, giving buyers a platform to attempt fresh highs.
Bears are watching for a clean break below this support. If it occurs, sellers could target the major upward trendline on the next leg down.
| Timeframe | Key Support | Key Focus for Buyers | Key Focus for Sellers |
|---|---|---|---|
| Daily | Major upward trendline | Break to new highs above “intervention” area | Rejection at highs and move back to trendline |
| 4-hour | 157.65 and minor upward trendline | Defend trendline and extend rally | Break of trendline toward major upward trendline |
| 1-hour | 157.90 and 157.27 | Buy dips at 157.90 / trendline to seek new highs | Push below 157.27 to shift structure bearish |
USD/JPY Technical Picture – 1-Hour Chart
On the 1-hour chart, buyers stepped in after price broke above a minor downward trendline. USD/JPY then briefly pulled back to 157.90 before launching another upside leg.
If the pair retreats again, dip buyers may reemerge around 157.90 and the nearby trendline. This should keep the bullish sequence intact. Sellers need a move below 157.27 to shift the structure to bearish and create room for new lows. Red lines mark today’s average daily range.
Key Data and Event Risks Ahead
Today, markets focus on the US CPI report. Tomorrow brings US Jobless Claims data. Friday includes the US PCE price index, University of Michigan Consumer Sentiment survey, and Job Openings figures.
Even with this busy calendar, the dominant market driver remains the US-Iran war. Economic data may have limited impact unless they change overall risk perceptions.
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