USD/JPY cycle high came back into focus on Tuesday as the pair moved closer to 162.85, with pressure on the yen tied to the US-Iran crisis and expectations that the Bank of Japan will keep rates steady in July.
The source article said the US dollar has faced some pressure since last week after soft US inflation data led markets to reprice Federal Reserve rate expectations. It said markets now see a 15% chance of a July rate hike, while the odds of a September move stand at 61%.
However, the same report said the US-Iran crisis has kept upside inflation risks in view. As a result, it said downside for the dollar may stay limited unless there is a clear de-escalation. The article also said rangebound trading may persist under that backdrop.
USD/JPY Cycle High Back in View
Axios reported that Trump is close to choosing between a 10-day ceasefire to reopen the Strait of Hormuz and a full-scale war with Israel against Iran, according to the source article. It said a ceasefire would weigh on the US dollar, while a full-scale war would likely push the greenback to fresh highs.
On the yen side, the article said little has changed. It pointed to reports before the Bank of Japan policy meeting that signaled the central bank will hold rates steady in July. Those reports had little market impact because traders had already expected no change. In addition, the article said the market does not expect the next rate hike before December.
BoJ Outlook and Yen Weakness
The source article said the broader crisis has hurt risk sentiment, while also keeping inflation risks tilted upward and weighing on the global growth outlook. It added that warnings from Japanese officials about stealth intervention against speculators have helped slow the yen’s slide.
Even so, the article said that may not prevent fresh lows for the yen against the dollar if the current situation lasts much longer or worsens. On the daily chart, it said sellers may emerge near 162.85, with 160.50 seen as support. On the four-hour chart, it said recent price action may have formed an ascending triangle, while a series of higher lows points to a bullish bias for now. It added that 161.50 is the next support on a break lower.
Later this week, the article said traders will watch US jobless claims on Thursday, followed by Japanese CPI and flash US PMIs on Friday.
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Source: InvestingLive
