FX Daily Strategy: Asia, April 24th

The back and forth headlines between U.S. and Iran have shown us there is no easy path towards the geopolitical picture. More importantly, Iran seems to be having a fractured order of command where the Revolutionary Guards are saying different things with the Iran Foreign Ministry. It complicates the picture as one side seem to be up for negotiation while the other believe they will win by continue taking the Strait of Hormuz hostage. The original planned talks are heading no where for now and will rely on future development to cue the market.

Market participants are cautiously optimistic, which will likely lead to strong correction on negative headlines, even false ones. The complication regarding the Strait of Hormuz will likely drag on. The physical supply disruption will soon hit the market if no easing is seen before June.

The March National headline CPI is expected remain below target range on the extension of energy stimulus. However, it should see the initial spike in energy prices pumping the headline number closing towards 2%. Core, core-core inflation will likely be little changed from February. It is critical to watch if the spike overcome the stimulus cushion and bring headline inflation much higher, as it may suggest Takaichi could provide from cost relief and delay BoJ hike.

On the chart, the pair is edging higher in consolidation above the 159.00 level as prices extend bounce from the 158.00/157.50 support last Friday. Above resistance at the 159.50 congestion will expose the 160.00 figure to retest. However, the latter is expected to cap and extend ranging action within the broad 160.00/158.00 area. Lower high sought to further pressure the 158.00 support later and where break will expose strong support at 157.50 to retest. Below this will confirm a top in place at the 160.46 high and see room for deeper pullback to retrace gains from the January low.