Fundamental analysis USDJPY for 19.04.2024

Most Asian currencies weakened on Friday amidst escalating geopolitical tensions, with the US Dollar (USD) and the Japanese Yen (JPY) garnering safe-haven demand. Reports of retaliatory strikes by Israel against Iran fueled risk aversion, pushing investors towards traditional safe-haven assets.

The Dollar index and dollar index futures experienced marginal gains during Asian trading, maintaining proximity to recent five-month highs. Meanwhile, the USDJPY pair witnessed a slight decline of 0.2% but remained near 34-year highs recorded earlier in the week.

Reports of Israeli drone strikes targeting Iran caused explosions in various regions, including near Iranian nuclear facilities, although Iranian news agencies denied significant damage. Nonetheless, the incidents signify a potential escalation in the Iran-Israel conflict, heightening geopolitical tensions in the Middle East. This spurred safe-haven demand for both the dollar and the yen, dampening sentiment towards risk-driven assets.

Furthermore, hawkish remarks from Federal Reserve officials added pressure to Asian currencies. Concerns over persistent inflation led to warnings that the central bank may maintain higher interest rates for a longer duration. Strong U.S. economic data supported this stance, prompting traders to scale back expectations for a June interest rate cut.

In conclusion, escalating geopolitical tensions and hawkish Fed rhetoric contributed to heightened volatility in the Asian currency market. Safe-haven assets like the USD and JPY benefited from increased demand, while regional currencies faced downward pressure. Market participants will closely monitor geopolitical developments and Fed commentary for further insights into currency market dynamics.

Technical analysis and scenarios:

Over the past few days, the currency pair unsuccessfully tried to overcome the resistance at 154.80. Today the price continues to hold below this mark. The RSI indicator is holding below the level of 50. Against this background, the scenario of quotes decrease remains a priority. 

Main scenario (SELL)

Recommended entry level: 154.600

Take profit: 153.700

Stop loss: 154.800

Alternative scenario (BUY)

Recommended entry level: 153.700

Take profit: 155.000

Stop loss: 153.500