What’s next? – USDJPY 17.04.18

The dollar was trading 0.09 percent lower vs the Japanese yen at 107.01 as of 06:50 GMT on Tuesday, with attention directed mainly to geopolitics as the dollar’s dynamic remains in focus.

The US dollar index, which gauges the greenback against six major currencies, was trading 0.01 percent lower at 89.13 by the time of this writing.

Market players continued to weigh higher geopolitical tensions between the United States and Russia following a US-led air strike over Syria.

On Saturday, France, Britain and the US conducted a multi-target air strike against key military facilities in Syria in response to a gas attack by President Bashar al-Assad on civilians.

While the US and Russia hold different positions in this matter, there hasn’t been any direct provocations in the days following the air strike. Investors interpreted that as a sign of release.

In other news, US President Donald Trump accused China and Russia of playing a “currency devaluation game,” calling it unacceptable as the Federal Reserve continues to raise rates.

Trump tweeted on Monday: "Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!"

Another topic weighing on the agenda is sanctions against Russia, which according to White House press secretary Sarah Huckabee Sanders will be decided in the “near future”.

Investors sensed no rush in the administration to impose a fresh batch of sanctions, in contrast to remarks by the Ambassador to the United Nations Nikki Haley.

On the data front, retail sales for March came in line with analysts’ forecast of a 0.2 percent growth rate. Retail sales were above expectations with a 0.6 percent rise.

Ahead in the day, building permits and housing starts for March are due for release as of 12:30 GMT, while industrial production figures will be out at 13:15 GMT.

Investors will also keep an eye on FOMC speakers, including Williams (13:15 GMT), Quarles (14:00 GMT), Harker (15:00 GMT) and Bostic (21:40 GMT).

The USDJPY is seen as a risk on/ risk off pair and its direction is directly related to market sentiment. As the dollar extends losses on the back of political instability, we can expect the pair to move lower and lower. That trend is bad for Japanese exporters and therefore we could also predict some pressure on the Nikkei 225 for the next few sessions.

FortFS