Dollar Pushing Higher Again

USDJPY is pushing higher again today with the YTD highs now only around 0.6% above market. A fresh rally in USDH is helping lift the pair again today as the greenback continues to draw safe-haven inflows amidst the ongoing conflict in Iran. US and Israel continue to mount air strike son Iran which has continued to retaliate. As such, there is little sign of the conflict ending soon, despite Trump earlier this week signalling that the operation could soon be complete. While the violence continues, USDJPY looks vulnerable to further upside.

US Inflation Due

Looking ahead today, traders will also be watching the latest US inflation data. Annualised CPI is expected to hold steady at 2.4%. Any upside surprise today should help drive USD higher again near-term, feeding into the hawkish shift we’ve seen in traders’ Fed expectations recently. The surge in energy prices raises the risk of fresh inflationary pressures which should keep the Fed from easing furtehr near-term. Indeed, if the conflict drags on longer than currently seen (up to eight weeks), USD could start to push more firmly higher as inflationary risks become more entrenched.

BOJ Intervention Risks

The obvious risk for USDJPY, however, is that we see fresh intervention from Japanese authorities if price continues higher. Japanese officials have previously been very vocal around current prices and their lack of comment so far suggests they are monitoring risks from the Middle East crisis for now as any intervention could prove futile in the wake of a fresh escalation in the conflict.

Technical Views

The rally in USDJPY has seen the market breaking back above the 1576.85 level. With momentum studies bullish, focus is on a continuation higher with 161.95 and the bull channel highs the next objective for bulls. If we correct lower at any point, 154.65 will be the key support to watch, with the channel lows below too.