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FUNDAMENTAL OVERVIEWUSD:The US dollar weakened across
the board yesterday after Trump basically confirmed the WSJ report in a Truth Social post that he would be open to end the
war with Iran without the Strait of Hormuz opening condition.This turned the sentiment
around in the markets and the positive mood improved further later in the day
when the Iranian President said that they were ready to end the war but wanted
guarantees.As you would expect,
traders went back to price rate cuts for the Fed with 13 bps of easing seen by
year-end compared to 3 bps yesterday. JPY:On the JPY side, the
currency strengthened just because of dollar weakness as the Japanese macro
conditions aren’t really pointing toward further tightening at the moment. In fact, the latest Tokyo CPI showed core inflation falling
further below the BoJ’s 2% target. There’s clearly no urgency to hike rates,
but the BoJ might look to deliver one if the yen weakens much further. USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can
see that USDJPY continues to pull back into
the 157.65 support. If the price gets there, we can expect the buyers to step
in with a defined risk below the support to position for a rally into the
161.95 level next. The sellers, on the other hand, will look for a break to
pile in for a drop into the major trendline around the 154.00 handle.USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we
have a minor downward trendline defining the current pullback. The sellers will
likely continue to lean on the trendline to keep pushing into new lows, while
the buyers will look for a break to pile in for a rally into new highs.USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, there’s
not much we can add here as the sellers will have a better risk to reward setup
around the downward trendline, while the buyers will look for a bounce around
the support or a break above the downward trendline to position for new highs. The
red lines define the average daily range for today. UPCOMING CATALYSTSToday we have the US ADP, the US Retail Sales and the US ISM Manufacturing
PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US NFP report. Do note that we have also Trump
addressing the nation today at 21:00 ET/01:00 GMT giving an “important” update
on Iran.
This article was written by Giuseppe Dellamotta at investinglive.com.
đź’ˇ DMK Insight
The US dollar’s recent weakness signals a shift in market sentiment, and here’s why that matters: Trump’s comments about potentially ending the war with Iran without preconditions have injected optimism into the markets. This could lead to a more stable geopolitical environment, which typically supports risk assets while putting pressure on safe havens like the dollar. Traders should keep an eye on how this sentiment plays out in the forex markets, particularly against currencies like the euro and yen, which often react to shifts in US dollar strength. If the dollar continues to weaken, we might see a breakout in pairs like EUR/USD, especially if it breaches key resistance levels. But don’t overlook the flip side—if geopolitical tensions escalate again, the dollar could rebound sharply. So, watch for any developments in the Iran situation and how they might impact broader market sentiment. Key levels to monitor are the 1.10 mark for EUR/USD and 150 for USD/JPY. Immediate focus should be on economic indicators that could further influence the dollar’s trajectory, especially any upcoming US data releases.
đź“® Takeaway
Watch for EUR/USD to breach 1.10 and USD/JPY around 150; geopolitical developments could shift sentiment rapidly.
