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USD/JPY approaches 161 mark, Trump’s Iran deadline becomes focus
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market xmaccount.commentary]: USD/JPY approaches the 161 mark, Trump's Iran deadline becomes the focus". Hope this helps you! The original content is as follows:
During the European trading session on Tuesday (April 7), the US dollar against the Japanese yen maintained a strong and volatile pattern, with the spot exchange rate trading in the range of 159.45-159.92, and reported at 159.628 during the session. The market as a whole shows the characteristics of "a top on the upside and a bottom on the downside". Affected by the approaching Trump Iran deadline, the US dollar has received safe-haven support. However, Japanese Finance Minister Katayama vowed to strengthen G7 coordinated intervention, limiting the room for further upside. At the same time, the 30-day logarithmic correlation coefficient between USD/JPY and EUR/JPY is well below +0.5, the correlation is disintegrating, and the linkage on the disk is weakening.
Taken together, although upward risks still exist, the volatility premium in the options market is at a low level. The market generally expects that the daily line may eventually break through the 161 mark. However, in the short term, it is suppressed by the threat of continued intervention and it is difficult to achieve a sustained unilateral rise.
Martin Miller, a market analyst at Reuters, said: "The daily chart of USD/JPY shows that it may eventually break through the 161 mark, especially if the conversion line and the baseline are aligned in a positive direction."
Fundamental analysis
The U.S.-Japan interest rate differential is still one of the core factors supporting the U.S. dollar. The U.S. Federal Reserve maintains a higher interest rate level, while the Bank of Japan's policy is relatively cautious, resulting in the interest rate differential still providing positive support to the U.S. dollar. This week, the minutes of the Federal Reserve's March meeting and the US March CPI data will become the focus of the market. If the data is hawkish, it will further strengthen the strength of the US dollar.
As for the Bank of Japan, affected by domestic economic data, the market’s bets on the BoJ’s short-term interest rate hike have cooled down. Overall, the differentiation of the central bank's monetary policy is still the main fundamental logic driving the trend of the US dollar against the yen.
Economic NumbersAccording to
Japan’s overall household expenditure fell by 1.7% year-on-year in February, which was far worse than market expectations of -0.7% and further worsened from the -1% in January. This unexpectedly weak data reflects the sluggish recovery of domestic consumption in Japan and may force traders to lower their expectations for the Bank of Japan's hawkish policy, which will be negative for the yen in the short term.
Geographic factors
Trump’s approaching deadline for Iran has become an important catalyst for today’s market. U.S. President Trump threatened that if Iran does not reopen the Strait of Hormuz before 8 pm (EST) on Tuesday, he will destroy Iran's power facilities and bridges, and may even "solve" the problem overnight. Geopolitical tensions have boosted safe-haven demand for the U.S. dollar and also made the market wary of oil supply risks.
Currently, the VIX volatility index and US stocks (especially Nasdaq) have not experienced violent fluctuations, but the uncertainty of the situation in the Middle East is still a key variable affecting risk appetite.
Mainstream view
Mainstream media generally believe that the US dollar will remain strong in the short term but its upward trajectory will be limited. United Overseas Bank (UOB) analysts Quek Ser Leang and Lee Sue Ann pointed out: "The underlying tone of the U.S. dollar against the yen is still strong, but it is expected to trade in the range of 159.40-159.95, and the wider range will be 158.80-160.45 in the next 1-3 weeks. Although there are opportunities in the long term Breaking through 159.45, but the high of 162.00 will constitute upward resistance. "
FXStreet analyst SagarDua said that the dollar against the yen was stable around 160.00 during the European session. Uncertainty about the situation in Iran kept the market cautious, and Japan's weak household spending data further weakened BoJ's hawkish bets.
Technical Analysis
The daily chart shows that the Ichimoku Balance Sheet conversion line and the base line are in a bullish arrangement, and the overall market structure is bullish. The price is currently trading in the upper half of the ascending parallel channel, and the 20-day exponential moving average (EMA) continues to rise, providing support for the price.
The RSI indicator is near 58 and above the 50 line, indicating that upward momentum still exists but is not overbought. The short-term support is located near the lower track of the channel 158.40. If it falls, it will further drop to 157.70. The first resistance above is the upper track of the channel 160.90. After breaking through, it is expected to confirm the extension to 162.00.
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