USD/JPY remains stuck in a tight range amid US-Iran deal optimism and hawkish Fed risk
FUNDAMENTAL OVERVIEW
USD:
The US dollar came under renewed pressure yesterday on heightened hopes for a US-Iran deal. The latest developments have certainly been more positive with Qatari mediation reportedly having produced a mutual understanding on Iran's frozen financial assets and Trump’s retreating on the nuclear material question.
In fact, having previously insisted that Iran's enriched uranium be shipped to the United States, Trump said on Truth Social that destruction in place under IAEA supervision, or transfer to a third country, would be acceptable.
What’s more important for traders is the reopening of the Strait of Hormuz. We are approaching the June FOMC meeting, and after Fed’s Waller speech on Friday, it’s now almost assured that the Fed is going to abandon the easing bias. If nothing changes before then, we might have a more hawkish than expected decision which is going to reverberate across the markets.
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.
JPY:
On the JPY side, nothing has changed fundamentally but it seems like the Japanese officials have finally stopped intervening in the FX market. The macro backdrop for the yen remains negative.
As a reminder, the BoJ left interest rates unchanged at 0.75% as widely expected at the last meeting but the highlight of the decision weren’t the three dissenters voting for a rate hike, but Governor Ueda adopting a less hawkish stance.
He mentioned that they expect underlying inflation to be around 2% from second half of 2026 but admitted that he doesn’t know how many months it would take to gauge timing of their next rate hike. This is going to keep weighing on the Japanese yen despite the interventions. All in all, the bias for the Japanese Yen remains bearish.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY is still consolidating around the 159.00 handle. The natural target should be the cycle high around the 162.00 level. If we get a pullback into the 158.00 support zone, we can expect the buyers to step in with a defined risk below the support 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 major upward trendline.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the consolidation around the 159.00 handle. The buyers will look for long opportunities around the 158.60 support or on the break above the 159.30 resistance. The sellers, on the other hand, will need to see the price breaking below the 158.60 support to extend the pullback into the 158.00 level next.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the price might just keep ranging until we get a breakout on either side. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we have the US Consumer Confidence report. On Thursday, we get the latest US Jobless Claims figures and the US PCE price index. On Friday, we conclude the week with the Tokyo CPI.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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