“Iran has reached out to Oman and QATAR, requesting that they mediate with Washington in an effort to halt the ongoing Israeli strikes and restart nuclear talks. At the same time, Saudi Arabia is also working behind the scenes to promote a ceasefire framework aimed at resuming talks, the source added.”
A de-escalation in the Israel-Iran conflict could dampen Japanese Yen demand. USD/JPY climbed to a high of 144.37 in early trading on June 16. Progress toward a ceasefire agreement could further reduce Yen demand. However, traders should brace for a sharp shift if talks collapse.
Middle East Conflict Muddies BoJ Policy Outlook
Developments in the Middle East come at a crucial time for the USD/JPY pair as the BoJ kicks off its June monetary policy meeting. Economists expect the BoJ to keep interest rates at 0.5% on June 17, exposing USD/JPY to the Bank’s policy outlook. A de-escalation in the Middle East would likely redirect focus to trade developments and Japan’s inflation and economic outlook.
Recent economic indicators, including household spending and trade data, supported a less hawkish BoJ rate path. However, a hawkish rate hold on June 17 may trigger a Yen rally, dragging USD/JPY lower. On the other hand, concerns about tariffs, trade terms, and the economy may drive the pair higher.
USD/JPY Daily Outlook: US Manufacturing in Focus
Later in the session, the US manufacturing sector will face scrutiny. Economists forecast the NY Empire State Manufacturing Index to rise from -9.2 in May to -6.7 in June.
A higher reading could ease US recession fears, bolstering US dollar appetite and pushing USD/JPY toward 145. A breakout above 145 could open the door to retesting the 50-day EMA. However, a softer print may fuel speculation about a US recession, supporting a more dovish Fed policy stance. Rising bets on a 2025 Fed rate cut may drag USD/JPY toward the June 13 low of 142.788, bringing 140 into sight.
AloJapan.com