FX Daily Strategy: Asia, May 15th

After Trump-Xi meets, the focus remain on the geopolitical front. The difference between U.S. and Iran seems to remain too big to bridge and it looks like Trump may resume military operation. If it realize, it will likely we will be seeing another wave of USD buying. The market has been looking towards the bright side for too long and could trigger a spiral from sell off in risk asset and turning to the dollar.

On the chart, cautious trade is giving way to the anticipated test of congestion resistance at 98.50. Rising intraday studies and improving daily readings highlight room for further gains, with a break above here opening up strong resistance at further congestion around 99.00 and the 99.18 high of 8 April. However, broader weekly charts are mixed/negative, suggesting any immediate tests of this range could give way to renewed consolidation, before improving longer-term charts prompt further gains. Meanwhile, support remains at congestion around 98.00 and should underpin any immediate setbacks.

We expect a 0.3% increase in April industrial production with a matching increase in manufacturing, restoring signs of an improvement in trend in early 2026 after slippage in March. Manufacturing signals have generally been picking up with ISM manufacturing data positive in the first four months of the year. April’s non-farm payroll showed aggregate manufacturing hours worked up by 0.2%m, which with modest productivity gains would allow a 0.3% rise in manufacturing output. We do not expect a significant impact from autos this month.

Higher oil prices may be supportive for mining, where we expect a 0.5% increase, but the non-farm payroll does not imply a strong April increase. With utilities seen little changed, we expect overall industrial production to match the manufacturing increase.

USD/JPY is another pair to watch as intervention impact have been reversed partially. We are yet to see a meaningful rebound in the pair despite solid USD demand but the path to the north still seems most likely. The current stimulus Japan is running and extended towards the end of June will likely require more funds, worsening their fiscal status. Fortunately, Takaichi has been restraining from raising extra budget and instead routed it from the special set aside funds. Market confidence could deteriorate swiftly if extra budget is raised to fund more stimulus.

On the chart, the pair is pressing higher as prices extend gains from the 155.00 spike low of last week to retrace losses from the 160.72 April current year high to approach strong resistance at the 158.00 congestion which is expected to cap. Break here, if seen, will open up room for stronger gains to the 158.50/159.00 congestion area. Meanwhile, support remains at the 157.00/156.00 congestion area. Would take break here to return focus to the downside for retest of the 155.00 low and further extend the April losses. Lower will see scope to 154.40/00, 200-day MA and congestion area.