USD/JPY Approaches Four-Decade High Amid US-Iran Tensions and BoJ Stance

### Fundamental Overview

**USD:** The US dollar has faced pressure recently due to softer inflation data, leading to a reassessment of Federal Reserve interest rate expectations. Currently, there is only a 15% chance of a rate hike in July, but the likelihood of a September increase remains above 50%. The ongoing US-Iran crisis is contributing to inflation risks, which may limit further declines in the dollar without a clear resolution. Recent reports indicate that former President Trump is deliberating between a ceasefire to reopen the Strait of Hormuz and escalating military action against Iran. A ceasefire could negatively impact the dollar, while military escalation might push it to new highs.

**JPY:** The Japanese yen remains under pressure, with little change in its fundamental outlook. Recent leaks suggest that the BoJ is expected to keep interest rates steady in July, a decision already anticipated by the market. Expectations for the next rate hike are not set until at least December. The US-Iran crisis continues to weigh on risk sentiment, affecting global growth prospects and keeping inflation risks elevated. Japanese officials have indicated potential interventions to counter speculation, but these measures may not prevent further depreciation of the yen if geopolitical tensions persist or escalate.

### Technical Analysis

**Daily Timeframe:** The USD/JPY is approaching a cycle high around the 162.85 level. Sellers may enter around this level, with a defined risk above it, to target a drop back to the 160.50 support level. Conversely, buyers will aim for a breakout to extend bullish positions.

**4-Hour Timeframe:** Recent price action suggests the formation of an ascending triangle, with a series of higher lows indicating a bullish bias. Buyers are likely to continue leveraging the trendline to push for new highs, while sellers may look for a break to extend the pullback towards the 161.50 support.

**1-Hour Timeframe:** The current setup shows buyers maintaining a favorable risk-to-reward ratio around the trendline, while sellers are positioned to act either at the cycle high or if the price breaks below the trendline.

### Upcoming Catalysts

Key economic data is on the horizon, with US Jobless Claims figures due on Thursday, followed by the Japanese CPI report and Flash US PMIs on Friday. Market attention will remain focused on developments related to the US-Iran situation.