**********Fragile Ceasefire Hopes Trigger USD/JPY Pullback**********
Key Questions
Why has USD/JPY pulled back from 160?
US-Iran peace talks have reduced Mideast tensions and supported higher oil prices, diminishing USD safe-haven demand and driving the pair down to 157.85-158. The yen's strength from oil import costs, with a 0.95 correlation to Brent crude dominating rates, has aided this pullback.
What factors are tempering USD/JPY selling pressure?
Risk-on sentiment and Nikkei gains are moderating selling, testing the pair's resilience for a rebound to 159 amid fears of yen intervention. Weekly notes are acting as a swing catalyst in this fragile environment.
How does Brent crude influence USD/JPY according to Citi?
Citi indicates that as long as Brent crude remains strong, USD/JPY will likely stay above its 200-day moving average. This ties into broader yen strength from Japan's oil import dependency amid current tensions.
US-Iran peace talks curb Mideast tensions/higher oil, fading USD safe-haven and aiding pullback from 160 to 157.85-158 tests with yen oil import strength (0.95 Brent corr dominates rates). Risk-on/Nikkei tempers selling, testing 159 rebound resilience amid intervention fears; weekly notes as swing catalyst.