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Investors are nervous after tensions in the Persian Gulf escalated after Iran shot down a U.S. drone last week. President Trump ordered an airstrike against Iranian targets, but the mission was aborted close to the last minute. There is fear that a wrong move by the U.S. or Iran could trigger a war in the Middle East. The grim situation helped bolstered the safe-haven yen.
In the U.S., the spotlight was on the Federal Reserve, which held its monthly policy meeting. FOMC members made no changes to rate levels, but hinted at a rate cut in 2020. Will the Fed wait that long before pressing the rate trigger? It’s noteworthy that eight FOMC members favor a rate cut in 2019. The markets are prepared for a move later this year, with the CME Group pricing in a rate cut in September at 62%.
See all the main events in the Forex Weekly Outlook
Updates:
With the yen posting sharp gains last week, we start at lower levels.
111.69 was the high point of the yen rally in the first half of May. 111.15 follows.
110.40 (mentioned last week), is the next resistance line.
109.73 has held in resistance since the end of May.
109.35 is the next resistance line.
108.70 has some breathing room after sharp losses by USD/JPY late in the week.
108.10 was a swing low in late May.
107.50 capped the pair in early April.
106.61 is next.
105.55 has held in support since early January.
104.65 is the final support level for now.
I am bearish on USD/JPY
The yen posted sharp gains last week, and tensions in the Persian Gulf could boost the safe-haven currency, as investors nervously eye breaking developments. The Fed has all but advertised a rate cut, which the markets are predicting will occur later this year. This could dampen enthusiasm for the U.S. dollar.
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