FX Daily Strategy: Asia, March 20th

This Friday shows a clear calendar after a slate of central banks on Thursday. It suggests geopolitical headlines will be in the driver's seat, if not already. Market participants may keep their position low after multiple Monday open giving them the black eye. Looking into the geopolitical picture, it seems there could be de-escalation with lower ammunition from Iran and other Middle East countries pressing for less attack on energy facilities. From the U.S.-Israel perspective, they have lately been cheering their success and Trump looks like he is seeking ways to exit properly while Netanyahu talked about completing objectives. However, sentiment could change abruptly and tilt this view.

The USD remain market's geopolitical tension barometer. Market participants have the tendency to buy USD, instead of JPY or precious metal, in times of strong risk aversion. Cash is king, after all, but the extent of purchase maybe limited if they would like to keep exposure low. The haven bids may rotate to JPY instead, though it would like a strong risk aversion case.

On the chart, anticipated selling interest has led to a drift lower to congestion support at 99.50, where flat oversold intraday studies are prompting consolidation. Daily stochastics are falling and the daily positive daily Tension Indicator is turning down, highlighting room for further losses in the coming sessions. A break below 99.50 will open up further congestion around 99.00. But rising weekly charts and improving longer-term readings should limit any initial tests in renewed buying interest/consolidation. Following cautious/corrective trade, fresh gains are looked for. A close above congestion resistance at 100.00 will help to stabilise price action. But a further close above above 100.40/54 is needed to turn sentiment positive and confirm continuation of late-January gains, initially towards resistance at congestion around 101.00 and the 101.15 multi-month Fibonacci retracement.

USD/JPY is once again appraoching 160 figure. Though it is not the previous high, it symbolize a psychological barrier and could see a quick run to precious high circa 162 if the figure being broken. Such will trigger an actual intervention from the BoJ as the pace matters more than level. The latest surge in USD/JPY has already been rapid, another run of one/two figure within a few days will be too much for the BoJ/Japan FM.

On the chart, limited on break below the 159.00 level and subsequent bounce from 158.57 low has seen gains to reach fresh high at 159.90. Daily studies are stretched but pressure remains on the upside and break above the 160.00 level cannot be ruled out. Clearance will further extend gains within the bullish channel from the April low and see room to the 161.00 level then the 161.95, 2024 year high. Meanwhile, support at the 159.00/158.57 area now underpin. Only below here will open up room for corrective pullback to the 158.00 level and 157.65 support.