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US Dollar to Remain on the Front Foot, USD/JPY Risk/Reward Poor at 125.00

US Dollar to Remain on the Front Foot, USD/JPY Risk/Reward Poor at 125.00

Justin McQueen,

USD, USDJPY, GBPUSD Analysis and News:

  • Russian-Ukraine Conflict Latest
  • Risk/Reward Not Attractive Through 125.00 for USD/JPY
  • Eyes on Another Bout of USD Demand

Russian-Ukraine Conflict Latest

According to FT sources, Russia is reportedly not looking for the Ukraine to be denazified in current ceasefire talks. Additionally, they are also prepared to let Kyiv join the EU if it remains military non-aligned, while both parties are said to be discussing a pause in hostilities as part of a potential deal. As such, this has helped underpin risk appetite, alongside the pullback in oil prices, which as I highlighted yesterday, has taken the S&P 500 towards resistance at 4590-4600.

Risk/Reward Not Attractive Through 125.00 for USD/JPY

Across the FX space, all eyes remain firmly fixed on the Japanese Yen, having traded at its lowest level since 2015 against the US Dollar. Although, as previously mentioned, 125.00 is the key barrier for the pair, particularly as intervention risks increase. A reminder that 125.00 had been the level previously where BoJ Governor Kuroda stated that the Japanese Yen had been very weak at that point. In turn, risk/reward for upside is not attractive at 125.00 and instead I would be looking to fade Yen weakness through there. Although, timing wise, I would feel more comfortable once month/quarter end has passed, given that we are an incredibly period for USD/JPY as shown below.

Eyes on Another Bout of USD Demand

That said, while the US Dollar is seemingly taking a breather, it is important to note that today is corporate USD demand day, which typically takes place two days before month-end. Therefore, risks are geared to another bout of USD strength throughout today’s session. This could be better played against the Pound, with the BoE starting to reign in their hawkish stance, as seen in BoE Governor Bailey’s cautious speech. Thus, putting Cable at risk of breaking below 1.3000.

With the economic calendar relatively light with only US Consumer Confidence and Fed Williams the notable highlights, focus instead will be on whether any further progress is made in Russia-Ukraine peace talks.

Dovish Bailey Downs GBP

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.