USDJPY Technical Analysis – Fed’s Bowman and de-escalation weighed on the US dollar

Fundamental Overview

The US dollar yesterday got bid across the board in the European session with no strong fundamental background which suggested that it could have been just some position squaring given the overstretched shorts on the dollar.

Sure enough, the gains were eventually completely erased and the greenback got sold off pretty hard on two key catalysts. The first one came from Fed’s Bowman who delivered dovish comments and even suggested that she would support a rate cut in July if inflationary pressures were to be muted. Since she’s been a hawkish member until yesterday, the market reacted strongly to such development.

The second catalyst came late in the US session as Iran’s retaliation was seen as just a show much like the one witnessed in 2020 with Suleimani. The market started to expect the end of the conflict which was then validated by Trump’s post on his social media platform.

On the JPY side, nothing has changed fundamentally, and the currency has been mainly driven by the risk sentiment. As a reminder, the BoJ kept interest rates unchanged at 0.5% and reduced the bond tapering plan for fiscal year 2026 as expected at the last meeting. That was a non-event given that everything was already priced in. The BoJ continues to place a great deal on the US-Japan trade deal and the evolution of inflation.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY rallied into the key 148.28 level yesterday morning amid some squeeze in US dollar shorts. The sellers stepped in around that level to position for a drop back into the 142.35 support. That’s where we will likely find buyers positioning for a rally back into the highs.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that as the price broke above the 146.28 level, the buyers piled in more aggressively to target the 148.28 level. The price then reversed pretty quickly following dovish Fed’s Bowman comments and the bearish momentum increased as the price broke below the 146.28 level and the end of Israel-Iran conflict came into sight.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that there’s not much we can do here as the price is trading basically in the middle of two key levels. From a risk management perspective, the buyers will have a better risk to reward setup around the 144.30 support zone, while the sellers will look for a break lower to extend the correction into the 142.35 level next. The red lines define the average daily range for today.

Upcoming Catalysts

Today, we have the US Consumer Confidence report and Fed Chair Powell Testimony. On Thursday, we get the latest US Jobless Claims figures and the Final US Q1 GDP report. On Friday, we conclude the week with the Tokyo CPI, the US PCE price index and the Final University of Michigan Consumer Sentiment report.