The US Dollar Index (DXY) is trading steadily around 99.10 during the Asian session on Thursday, following modest losses in the previous day and after reaching a six-week high of 99.47 on Wednesday [1][2]. The USD/JPY pair is also trading flat near 159.00, reflecting a calm market as investors await further developments in the ongoing negotiations between the United States and Iran [1][2]. US President Donald Trump stated on Wednesday that talks with Iran are in the 'final stages,' expressing optimism about reaching a deal but warning that if an agreement is not reached, the US may take 'some things that are a little bit nasty' [1][2]. According to a Bloomberg report, President Trump reiterated his readiness to resume military actions within days if Iran rejects US terms [2]. In response, Iranian President Masoud Pezeshkian stated on social media that Tehran has no intention of capitulating and described attempts to force surrender as an illusion [2].
The optimism surrounding a potential US-Iran deal has contributed to a decline in oil prices and has slightly reduced expectations for a Federal Reserve interest rate hike this year. The probability of at least one Fed rate hike in 2024 has decreased to 51% from 61.3% earlier in the week, a significant shift from the two rate cuts anticipated before the Middle East conflict escalated [1]. However, the Federal Open Market Committee (FOMC) minutes released on Wednesday revealed a hawkish tone, with most Fed officials warning that interest rates may need to rise if inflation remains above the 2% target, citing concerns about inflationary pressures driven by the Iran war [2].
In Japan, Prime Minister Sanae Takaichi announced an extra budget to offset the impact of the Middle East situation, raising fiscal concerns. The 10-year Japan Government Bond (JGB) yield increased by 0.11% to near 2.77%, close to its multi-decade high of 2.81% reached on Tuesday [1].
From a technical perspective, USD/JPY maintains a modest bullish bias, trading above the 20-day exponential moving average (EMA) at 158.37, with the Relative Strength Index (RSI) at 55, indicating neutral-to-positive momentum [1]. Immediate support is seen at the 20-day EMA, while resistance is at the April 30 high of 160.73 [1].
CONCLUSION
The US Dollar and USD/JPY remain steady as markets await the outcome of US-Iran negotiations, with President Trump signaling both optimism and the possibility of military action. Fed officials maintain a hawkish stance due to inflation concerns, while Japanese fiscal measures add to market uncertainty. Overall, market sentiment is cautious, with traders closely monitoring geopolitical and monetary policy developments.