FX Daily Strategy: Asia, April 15th
Quiet Calendar Sees Focus Remain Geopolitical
DXY Broadly Consolidating
USD/JPY Teasing 160.00
Figure: Core Inflation Estimates (%)
The Fed on April 29/ECB on April 30/BOE on April 30 will be of great interest for further guidance on central bank thinking. By these dates it should also be clearer whether the Iran war over or still exchanging isolated fire with Strait of Hormuz blockade.
We still pencil in 50bps of cuts from the Fed before end 2026 (though this is a close call after the good March employment report (here) and 25bps cuts from the ECB and BOE, due to the softer underlying economic conditions. Other economists are putting forward similar caution, with the OECD baseline forecasts based on March 20 oil and natural gas prices showing little to modest 2nd round effects.
The greenback will remain the backbone of FX market volatility. Geopolitical tension has driven market participant bid/offer the USD whenever the wind change. It will difficult to gauge the next leg as the fog of war persists. However, it looks to be more room for de-escalation than re-escalation in the current picture.
On the chart, prices extend cautious trade beneath resistance at congestion around 99.00 and the 99.18 high of 8 April. Intraday studies are rising and oversold daily stochastics are flattening, suggesting room for a retest of this range. But the negative daily Tension Indicator and unwinding overbought weekly stochastics should limit any break in renewed selling interest towards congestion resistance at 99.50. Following cautious trade, fresh losses are looked for. However, a close below support at the 98.70 Fibonacci retracement is needed to add weight to sentiment and extend late-March losses below 98.50 towards 98.00/10.
The ebbs and flow of geopolitical tension did not allow a sustained break of 160. USD/JPY is seen consolidating around the level, indicating neither USD nor JPY have the strength to breakout in current macro picture. With intervention threat looming above 160, it still looks like the next leg could be south.
On the chart, the pair turned lower in consolidation beneath the 160.00 figure after failing to sustain break of 159.45 resistance. Mixed daily studies suggest this level should continue to limit bounce attempt and further extend consolidation here. Would take break to expose the 160.46 March current year high to retest and see room to extend the underlying bull trend from the 2011 low. Meanwhile, support remains at the 159.00 congestion which should underpin. Below this will open up room for retest of support at the 158.27/00 congestion then the 157.50, 19 March low.