FX Daily Strategy: Asia, February 24th

The Australian CPI will be lively after the RBA's hawkish tilt. It is widely expected to remain above the 3% target range but we are wary of speculation it will run further hotter from there. What is more important is the trimmed mean CPI, where a high read will persuade market participant to speculate of another imminent hike coming. Thus, driving the Aussie higher on the release.

On the chart, the pair is leaning lower in consolidation below the .7100 level and see room for pullback to the .7000 level. Break here will see deeper pullback to retrace the November/February rally and see extension to strong support at the .6900 level and .6870, 38.2% Fibonacci level. Meanwhile, resistance at the .7100 level now expected to cap. Regaining this will ease the downside pressure and clear the way for retest of the .7147 high and see scope to further extend gains from the April 2025 low.

USD is weakening significantly as geopolitical tension between U.S. and Iran rises, so as the renewed tariff policy from Trump after SCOTUS struck down his previous approach. The uncertainty from both ends are leading to USD offers, aligning with U.S. Treasury yields latest trend. Market participants will be quietly waiting for the clarity in both fronts before resume their bids to avoid being wrong footed.

On the chart, prices extend pressure on congestion resistance at 98.00. Daily stochastics and the daily Tension Indicator continue to rise, highlighting room for a break above here towards further congestion around 98.50. But mixed weekly charts and deteriorating longer-term readings should limit any tests in renewed selling interest/consolidation. Meanwhile, support remains at congestion around 97.50. A close beneath here will turn sentiment neutral and give way to consolidation above 97.00.

USD/JPY has been consolidating the relief drop after election. The ebbs and flow has been minimal from the JPY end as we have not heard any major policy update from Takaichi. JGB yields in the far end have been moderating and seems to be market participants are being more comfortable with the lack of debt issuance from Japanese government to fund their stimulus. The next leg looks south as the stories for shorting JPY ran out.

On the chart, corrective gains saw resistance at the 155.50/156.00 congestion area capping bounce last week. Rejection from the 155.64 high see prices back to pressure the 154.00 level and where break will open up room for retest of the 153.00 support. Below this will return focus to the February and Janyary lows at 152.27/152.10. Break of these will see room for deeper pullback to retrace gains from the April 2025 year low. Meanwhile, resistance is lowered to 155.00 level which is expected to cap and sustain rejection from the 155.64 high.