USD/JPY, AUD/USD Forecast: Dollar Slips as Risk Assets Rebound on Hormuz Headlines

• USD may have seen near-term highs
• Hormuz escort headlines lift risk sentiment
• AUD/USD bounces while USD/JPY slips
• Katayama revives BOJ intervention risk

Gulf Headlines Drive Dollar Pullback

The US dollar may have seen its near-term highs for now as markets attempt to digest a torrent of headlines from the Gulf, with the reaction most evident in FX pairs such as AUD/USD and USD/JPY.

The shift reflects reports suggesting a coalition of nations may escort ships through the Strait of Hormuz. The Wall Street Journal reported the Trump administration could announce plans as soon as this week for multiple countries to help escort vessels through the waterway, while comments from Donald Trump carried by Reuters suggested the US was speaking with several nations about helping secure the strait.

However, it's still just talk. Nothing has been agreed, let alone any guarantee escorts would stop attacks on tankers if tensions flare again. The timing also raises questions. The headlines crossed during early Asia trade on Monday, a window notorious for extremely thin liquidity that often produces exaggerated moves and unreliable price signals.

Even so, the mere possibility that energy flows may normalise has been enough to take some heat out of oil and the dollar. Asian equities and US stock futures have reversed higher as traders lean into the idea the worst case scenario for supply disruption may be avoided.

But crude is not confirming the narrative. Brent has come off its earlier highs but remains flat for the session, suggesting the geopolitical risk premium is still embedded and the market is far from convinced the issue has been resolved.

Despite warranted scepticism, FX continues to run with the idea, aided by comments from Japan’s finance minister warning authorities are prepared to take decisive steps on FX. Combined with stretched positioning following a sharp two week rally in the dollar, her remarks have helped accelerate the unwind, adding to the sense the greenback may have printed a near term high.

However, traders should ask how much has actually changed. 

USD/JPY Tests Breakout Zone

 

Source: TradingView

USD/JPY remains in a strong uptrend with the 50 and 200DMAs both sloping higher. Momentum indicators also continue to point north with MACD positive and rising while RSI (14) is trending higher without yet pushing into extreme territory. Taken together, the technical backdrop still favours a bullish bias.

However, technical signals may carry less weight in markets being driven by headlines, something we’ve seen repeatedly over the past week.

That’s why 159.45 in USD/JPY is now the level I’m watching closely. It marks the high set in early January before Friday’s break to fresh multi-year highs. In simple terms, it’s the first real test of whether the breakout has staying power.

If bulls step back in and push USD/JPY back above that level, it would reinforce the broader uptrend and keep the focus on the topside. But if they don’t, the failed break risks bringing the January uptrend line into view quickly, with 157.88, 156.53 and the 50DMA the key levels to watch beneath the trend.

AUD/USD Retains Bullish Structure

Source: TradingView

Notably, AUD/USD has once again bounced from beneath .7000, mirroring the price action seen earlier during the Iran conflict. With a series of higher lows still in place since early February and the pair holding above both the 50DMA and the November uptrend, the broader bullish structure remains intact.

Momentum has cooled somewhat. RSI (14) and MACD have both been trending lower, pointing to waning topside strength, but importantly they have only eased back towards neutral territory rather than signalling outright bearish momentum.

From a macro perspective, bulls also have a supportive backdrop given the Aussie is a well known proxy for risk appetite. It means that even if energy prices soften, improving sentiment towards risk assets could help blunt downside pressure in the pair.

On the topside, the obvious level to watch remains the February 2023 high near .7160, where the pair stalled on multiple occasions last week.

Should the latest push back above .7000 struggle to gain traction, attention would likely shift to support beneath, including the February uptrend, the 50DMA, the November uptrend and .6900.