USD/JPY remains stuck in a tight range amid US-Iran deal optimism and hawkish Fed risk

FUNDAMENTAL OVERVIEWUSD: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 TIMEFRAMEOn 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 TIMEFRAMEOn 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 TIMEFRAMEOn 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 CATALYSTSToday, 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.
This article was written by Giuseppe Dellamotta at investinglive.com.

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