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FUNDAMENTAL OVERVIEWUSD:The US dollar strengthened
yesterday after Iran rejected the proposed ceasefire and outlined its own
conditions that included closure of all US bases in the Gulf, reparations for
the attacks, lifting of all sanctions and allowing Iran to retain its missile
program without restrictions. These conditions are of
course unacceptable for the US, so we are now in a deadlock. For now, the US
dollar is likely to remain supported until there is an official de-escalation.JPY:On the JPY side, nothing
has changed as lack of progress on the inflation front and geopolitical risks
will likely keep weighing on the currency. The latest Japanese CPI report showed further easing in
inflation with the Core figure falling well below the BoJ’s 2% target. The BoJ today has announced
that it will begin publishing data on the estimated
core consumer price inflation rate but even their estimates are not really
calling for immediate action. On the wage growth side, the
initial outcome of the spring wage negotiations
points to a third straight fiscal year in which Japan sees average wage hikes
of above 5%. This should keep the tightening bias intact, but the central bank
might want to wait for the US-Iran war to end to avoid exacerbating growth
fears.USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can
see that USDJPY bounced on the 157.65 support
and it’s now approaching the resistance around the 160.00 handle. The buyers continue
to target the 161.95 level, but a break above the 160.00 level is needed to open
the door for higher prices. There’s not much else we can glean from this
timeframe, so we need to zoom in to see some more details. USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can
see more clearly the consolidation between the 157.65 support and the 159.75
resistance. We can expect the sellers to step in around the resistance with a
defined risk above it to position for a drop back into the support. The buyers,
on the other hand, will look for a break higher to increase the bullish bets
into new highs.USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, we have
a minor upward trendline defining the bullish momentum on this timeframe. If we
get a pullback, we can expect the buyers to lean on the trendline with a
defined risk below it to keep pushing into new highs, while the sellers will
look for a break lower to pile in for a drop into the 157.65 support next. The
red lines define the average daily range for today. UPCOMING CATALYSTSToday we get the latest US Jobless Claims figures.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The US dollar’s recent strength is tied to geopolitical tensions, and here’s why that matters: Iran’s rejection of a ceasefire and its stringent demands could escalate regional instability, impacting oil prices and, by extension, the dollar. Traders should keep an eye on how this geopolitical friction influences the broader market, especially commodities like crude oil, which often sees volatility in response to Middle Eastern conflicts. If oil prices spike, expect the dollar to strengthen further as investors flock to safe-haven assets. On the flip side, if diplomatic efforts somehow ease tensions, we could see a reversal in dollar strength as risk appetite returns. Watch for key levels in the dollar index; a break above recent highs could signal further bullish momentum. Keep an eye on economic indicators like inflation data and employment figures, as these will also play a crucial role in shaping dollar sentiment in the coming weeks.
📮 Takeaway
Monitor the dollar index closely; a break above recent highs could indicate further strength, especially if geopolitical tensions escalate.
