FundamentalOverview

The US dollar yesterday gotbid across the board in the European session with no strong fundamental backgroundwhich suggested that it could have been just some position squaring given theoverstretched shorts on the dollar.

Sure enough, the gains wereeventually completely erased and the greenback got sold off pretty hard on twokey catalysts. The first one came from Fed’sBowman who delivered dovish comments and even suggested that she wouldsupport a rate cut in July if inflationary pressures were to be muted. Sinceshe’s been a hawkish member until yesterday, the market reacted strongly tosuch development.

The second catalyst camelate in the US session as Iran’sretaliation was seen as just a show much like the one witnessed in 2020with Suleimani. The market started to expect the end of the conflict which wasthen validated by Trump’s post on his social media platform.

On the JPY side, nothinghas changed fundamentally, and the currency has been mainly driven by the risksentiment. As a reminder, the BoJ kept interest rates unchanged at 0.5% andreduced the bond tapering plan for fiscal year 2026 as expected at the lastmeeting. That was a non-event given that everything was already priced in. TheBoJ continues to place a great deal on the US-Japan trade deal and theevolution of inflation.

USDJPYTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that USDJPY rallied into the key 148.28 level yesterday morning amid some squeezein US dollar shorts. The sellers stepped in around that level to position for adrop back into the 142.35 support.That’s where we will likely find buyers positioning for a rally back into thehighs.

USDJPY TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that as the price broke above the 146.28 level, the buyers piled in moreaggressively to target the 148.28 level. The price then reversed pretty quicklyfollowing dovish Fed’s Bowman comments and the bearish momentum increased asthe price broke below the 146.28 level and the end of Israel-Iran conflict cameinto sight.

USDJPY TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, we cansee that there’s not much we can do here as the price is trading basically inthe middle of two key levels. From a risk management perspective, the buyerswill have a better risk to reward setup around the 144.30 support zone, whilethe sellers will look for a break lower to extend the correction into the142.35 level next. The red lines define the average daily range for today.

UpcomingCatalysts

Today, we have the US Consumer Confidence report and FedChair Powell Testimony. On Thursday, we get the latest US Jobless Claimsfigures and the Final US Q1 GDP report. On Friday, we conclude the week withthe Tokyo CPI, the US PCE price index and the Final University of MichiganConsumer Sentiment report.