Key Points

• USDX trades at 99.636, down 0.025 (-0.03%), while Reuters reported the broader dollar index at 99.79, still close to recent highs.
• Traders now price a 64.4% probability that the Fed stays on hold in December, up from 60.2% a day earlier.
• USDJPY trades near 158.73 to 159.45, with the yen recovering from this year’s low at 160.46 as intervention fears ease and BOJ hike expectations build.

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The dollar eased slightly in Asian trade, but it has not lost its broader footing. Reuters reported the USDX at 99.79, down marginally on the day after a strong prior-session gain, while your chart shows USDX at 99.636, down 0.03%.

The move reflects a market that has stopped chasing the dollar higher for now, but has not found a clear reason to abandon it either.

Ceasefire hopes are the immediate reason for the pause. Traders have become a little less aggressive about buying dollars as headlines suggest Washington may be looking for an off-ramp in the Iran war.

US Secretary of State Marco Rubio said Washington could see the ‘finish line’ in the Iran war, which is now in its fifth week, and the US will have to reexamine ties with NATO after the conflict https://t.co/zcdVcXiPwb

— Reuters (@Reuters) April 1, 2026

At the same time, mixed signals from the White House, the Pentagon, and regional allies have kept conviction low. Markets are still trading headline to headline rather than building strong directional positions.

A softer dollar here looks more like consolidation than reversal. The greenback still holds support from its safe-haven status and from the fact that the US is better insulated from oil disruption than major importers. Reuters noted that the dollar has benefited from that relative position since the conflict began in late February.

Fed Expectations Have Shifted Toward a Longer Hold

The rates market has changed the tone. Fed funds futures now imply a 64.4% probability that the Fed remains on hold in December, up from 60.2% the day before. That is a clear sign that traders are backing away from the idea of an easier policy later this year.

Federal Reserve Bank of Kansas City Jeff Schmid cautioned that the US central bank should not look through the impact on inflation of a surge in energy prices stemming from the conflict in Iran https://t.co/x1zaygEbtU

— Bloomberg (@business) March 31, 2026

Oil has driven much of that repricing. The closure of the Strait of Hormuz pushed energy prices sharply higher, and that forced markets to revisit inflation assumptions.

A ceasefire and a sharp drop in oil could remove the inflation premium from rates quickly, but until that happens, traders are still reacting to the shock already in the system.

That backdrop keeps the dollar supported even as it pauses. Higher-for-longer Fed pricing makes it harder for the greenback to weaken much unless the data softens or oil drops decisively.

Euro Has Started to Stabilise

The euro has found a little support as the dollar stalls. Reuters reported EURUSD at $1.1565, while your chart shows 1.14696, which suggests the market has been volatile across sessions. In Reuters’ reporting, the euro has started to stabilise after the ECB opened the door to rate hikes if war-driven inflation lasts.

ECB Governing Council member Boris Vujcic said the increase in inflation expectations since the Iran war broke out isn’t a surprise https://t.co/WfYGNH8s6G

— Bloomberg (@business) March 31, 2026

Societe Generale said a euro bounce is possible if the ECB hikes while the Fed stands aside.

That does not mean the euro has a clean path higher. Europe still faces greater energy-shock exposure than the US, so any sustained advance in EURUSD would likely require both lower oil prices and a firmer ECB stance.

Technical Analysis

US Dollar Index (USDX) is trading near 99.63, pulling back slightly after testing highs around the 100.40–100.50 region. Price action shows the dollar pausing just below resistance, with the recent rally losing some momentum as the market consolidates near the upper end of its range.

From a technical standpoint, the trend remains mildly bullish. Price is holding above the 20-day (99.34) and 30-day (98.90) moving averages, which continue to slope upward and provide underlying support. The 5-day (99.81) and 10-day (99.46) are clustered close to current levels, reflecting short-term indecision as price compresses just below resistance.

Key levels to watch:

• Support: 99.30 → 98.90 → 97.90
• Resistance: 100.40 → 100.70 → 101.00

The index is currently consolidating below the 100.40–100.50 zone, which has capped recent upside attempts. A sustained break above this level could trigger further gains toward 100.70 and potentially 101.00, especially if momentum builds.

On the downside, 99.30 is acting as immediate support. A break below this level could lead to a pullback toward 98.90, though such a move would likely remain corrective as long as the broader structure holds.

Overall, the USDX remains in a gradual uptrend, with current price action suggesting consolidation rather than reversal. However, with price sitting just below key resistance, traders should watch closely for either a breakout or a deeper pullback as the next directional move develops.

What Traders Should Watch Next

Friday’s US jobs report is the next big macro test. Reuters said economists expect 60,000 jobs added in March after an unexpected 92,000 loss in February. A weak print would likely revive Fed cut expectations and pressure the dollar. A firmer print would reinforce the current higher-for-longer stance.

The other driver is still oil. A clear de-escalation that reopens Hormuz and pushes crude lower would take some of the inflation premium out of rates and remove support from the dollar. Another escalation would do the opposite.

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Trader Questions

Why is the US Dollar Holding Near 100 Instead of Breaking Higher?

The dollar is still supported by safe-haven demand and a more cautious Fed outlook, but ceasefire hopes have reduced the urgency of fresh defensive buying. Reuters reported the dollar index near 99.79, while your chart shows USDX at 99.636, both still close to recent highs.

What is Keeping the Dollar Supported Right Now?

Three forces are doing most of the work: Middle East uncertainty, higher-for-longer Fed pricing, and the US economy’s relative insulation from oil shocks as a net energy exporter. Reuters said those factors have kept the greenback supported since the conflict began in late February.

Why Did the Dollar Ease if Geopolitical Risks Are Still High?

Markets started to price a possible off-ramp in the conflict after comments from US officials suggested the war could end within weeks. At the same time, Pentagon and regional headlines still pointed to escalation risk, which left traders cutting back aggressive dollar longs rather than fully reversing them.

What Do Markets Expect From the Federal Reserve Now?

Fed funds futures imply a 64.4% probability that the Fed stays on hold in December, up from 60.2% a day earlier. That shift shows traders are still leaning toward a longer hold because oil-driven inflation risk has not cleared.

Why Do Oil Prices Matter So Much for the Dollar Index?

Higher oil prices lift inflation expectations and reduce the chance of near-term Fed easing. That tends to support the dollar, especially when the US is less exposed to imported energy than Europe or Japan. Reuters said traders are still reacting to the inflation premium created by the Hormuz shock.

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Japan’s Tankan large manufacturing outlook index was 14 in the first quarter. This was above the forecast of 13. The result indicates a higher reading than expected for the outlook among large manufacturers. The difference between the actual figure and the forecast was 1 point. This morning’s Tankan survey result is a clear positive signal for the Japanese economy. The beat on the forward-looking indicator suggests that major exporters are confident about the coming quarter, reinforcing the strong February export data we saw which showed a 7.5% year-over-year increase. This confirms the underlying economic momentum is holding up better than many had anticipated. For those trading equity derivatives, we see this as a catalyst to break the Nikkei 225 out of its recent consolidation. The index has been trading in a narrow band for weeks, and this strong domestic data could justify a move higher, making long call spreads an attractive strategy to position for a potential breakout. Implied volatility has been compressed, suggesting options are relatively cheap. In the currency space, this data strengthens the case for a stronger yen. A robust economy gives the Bank of Japan more room to continue its policy normalization, a sentiment echoed by recent official comments. We believe traders should be looking at buying puts on USD/JPY, as the pair could test lower supports, especially with the US Fed signaling a pause. Looking back, we remember the volatility in early 2025 when the BoJ began telegraphing its first rate hike in a generation. Similar strong data prints back then preceded significant yen appreciation, catching many off guard. The current situation feels comparable, suggesting that underestimating the yen’s potential to rally from here is a significant risk. This outlook also impacts interest rate derivatives, as a stronger economy puts upward pressure on bond yields. The 10-year JGB yield has already crept up to 1.30% this past week, a multi-year high. We expect this trend to continue, making short positions in JGB futures a viable hedge or speculative play on further BoJ tightening.

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Japan’s Tankan large manufacturing index came in at 17 in the first quarter. This was above the expected reading of 16. The index measures business conditions reported by large manufacturers in Japan. It is used as an indicator of sentiment in the manufacturing sector. The stronger-than-expected Tankan reading of 17 for large manufacturers signals robust confidence in the economy. This positive surprise reinforces the view that the Bank of Japan has room to tighten policy further. Consequently, we are looking at opportunities to build long positions in the Japanese yen against the dollar. This positive sentiment is likely to fuel the Nikkei 225, which has been consolidating after its record-breaking run back in 2024 and 2025. We see this as a green light to consider buying call options on the index, targeting a retest of recent highs. This Tankan data suggests corporate earnings will continue to support equity valuations. We must remember the context of the Bank of Japan’s policy normalization that began two years ago. This latest data point significantly increases the probability of another rate hike by the summer, with recent core inflation figures hovering stubbornly around 2.3%. Traders should therefore be cautious with Japanese Government Bonds and could view any strength as an opportunity to initiate short positions in JGB futures. Over the next few weeks, all eyes will be on the upcoming CPI data and the final spring wage negotiation results. A strong outcome in either, combined with this Tankan report, would solidify the case for a more hawkish BoJ. This will be the primary catalyst for our derivative strategies across yen, equity, and bond markets.

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USD/IDR has moved modestly higher towards 17,000, linked to a firm US Dollar, risk-off trading and oil-related terms-of-trade pressure. Near-term resistance is cited around 17,100. Bank Indonesia has introduced FX-denominated instruments, SVBI and SUVBI, aimed at smoothing volatility and supporting US Dollar liquidity in the domestic market. These tools are described as not changing the underlying FX anchor.

Drivers Behind Recent Rupiah Weakness

The measures are intended to improve onshore USD intermediation by allowing exporters and banks to hold and recycle dollars locally. This can reduce the need to buy USD aggressively in the spot market and may limit disorderly moves in USD/IDR. External conditions are presented as the main driver for the rupiah, with weaker risk sentiment and elevated oil prices linked to the risk of a prolonged Iran conflict. The article notes that this backdrop is likely to keep IDR under pressure in the near term, alongside other Asian currencies. We see the USD/IDR pair continuing its upward trend, currently trading around 16,150 as we enter April. The momentum toward the 17,000 level is being driven by a persistently strong US dollar. This external pressure remains the key factor influencing the Rupiah’s value. The dollar’s strength is supported by recent US inflation data, which came in at a stubborn 3.5% and has caused markets to delay expectations for Federal Reserve rate cuts until later this year. This policy outlook creates a challenging environment for emerging market currencies. We’ve seen this dynamic before, recalling the sharp currency adjustments back in 2024 when Fed policy diverged from global expectations.

Options Positioning For A Higher USDIDR

Adding to the pressure, Brent crude oil prices are holding firm above $90 per barrel, straining the trade balance of net oil importers like Indonesia. This economic headwind is compounded by a general risk-off sentiment in global markets. These conditions make it difficult for the Rupiah to find support. For derivative traders, this environment suggests the path of least resistance for USD/IDR is higher. Bank Indonesia’s new tools may curb extreme daily volatility, but they are unlikely to reverse the underlying trend. This makes buying USD/IDR call options with expirations in the next one to three months a logical strategy to position for a move towards the 17,100 resistance level. Given that BI is actively smoothing out sharp movements, strategies that benefit from a gradual ascent may be more effective than those betting on a sudden spike in volatility. Therefore, considering longer-dated options could be more cost-effective. This allows a position to profit from the steady upward grind we are anticipating in the coming weeks. Create your live VT Markets account and start trading now.

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UOB expects Bank Negara Malaysia (BNM) to keep the Overnight Policy Rate at 2.75% through early 2027. BNM says decisions will stay data-dependent, with attention on geopolitical spillovers and changes in US policy. BNM expects resilient domestic demand to support GDP growth near its potential rate in 2026. It also points to a moderate inflation outlook and broadly favourable financial market conditions.

Malaysia Macro Buffers

BNM says it will keep monitoring external risks and their effects on domestic demand and inflation. It also refers to Malaysia’s robust domestic demand, moderate inflation, a sound financial sector, and net energy exporter status as buffers. Domestic financial markets are expected to remain broadly favourable, supported by strong fundamentals and accommodative global financial conditions. Bond yields are expected to be stable, partly due to foreign inflows, and equity markets are linked to improving confidence in Malaysia’s fundamentals. Risks mentioned include shifts in US monetary policy, corrections in AI-linked equities, and geopolitical volatility. Spillovers are described as manageable due to Malaysia’s deep market base and well-capitalised banks. Given the expectation that Bank Negara Malaysia will hold the Overnight Policy Rate steady at 2.75%, we see limited volatility in short-term interest rates for the coming weeks. With Malaysia’s latest inflation print for February 2026 holding steady at 2.9%, traders may consider strategies that profit from stable rates, such as selling interest rate volatility. This is a significant change from the hiking cycle we saw end in mid-2023.

Trading Implications And Key Risks

This policy stability should continue to anchor the Malaysian Ringgit, which has been trading in a tight range around 4.65 against the US dollar. We believe that range-bound currency option strategies, like selling strangles on the USD/MYR pair, could be advantageous. This contrasts with the significant volatility we had to manage back in 2025, when US policy uncertainty was at its peak. The main external risk we are monitoring is the US Federal Reserve’s policy. While their March 2026 meeting signaled a continued pause, market pricing now implies a 60% chance of a rate cut by July. Any confirmed shift towards easing in the US would likely strengthen the Ringgit and challenge any short MYR positions. Domestically, the outlook for equities appears positive, supported by resilient growth, with early estimates for Q1 2026 GDP pointing to a solid 4.5% expansion. The FBM KLCI index has already gained 3% since the start of the year, suggesting that buying index futures or call options could capture further upside. This confidence is reinforced by steady foreign inflows into the local bond market observed throughout the first quarter. However, we must remain prepared for external shocks, such as a correction in global AI-related stocks or geopolitical flare-ups. These events could temporarily override Malaysia’s strong domestic picture. For this reason, holding some inexpensive, out-of-the-money put options on the equity index would be a prudent hedge against unforeseen market downturns. Create your live VT Markets account and start trading now.

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Australia’s S&P Global Manufacturing PMI came in at 49.8 in March. The forecast was 50.1. A reading below 50 suggests a slight contraction in manufacturing activity. A reading above 50 indicates expansion.

Manufacturing Momentum Turns Lower

The dip in Australia’s manufacturing PMI to 49.8 is a notable shift, as it marks the first move into contractionary territory this year. This data point, missing expectations, suggests a loss of momentum in the industrial sector. We must consider that this could be an early warning sign for broader economic slowing. For traders focused on the ASX 200, this prompts a more defensive posture. With the index recently trading near 8,150, we should consider buying put options to hedge long portfolios against a potential pullback. The weakness in manufacturing could translate to poorer earnings forecasts for industrial and materials companies. This reading directly impacts our view on the Australian dollar, which is sensitive to economic growth indicators. Given the AUD/USD is hovering around 0.6530, this weak data makes a Reserve Bank of Australia rate hike less likely and could bring forward discussions of rate cuts later in the year. Consequently, we see merit in strategies that profit from a weaker AUD, such as buying puts on the currency. The RBA is now in a difficult position, as the latest monthly inflation figures from February showed a stubborn 3.5% reading, still well above their target band. This combination of slowing growth and sticky inflation increases economic uncertainty. This environment is ideal for volatility traders, who could look at straddle or strangle options strategies on the currency or index. We must also view this in the context of demand from China, where their own Caixin Manufacturing PMI recently showed modest expansion. However, continued weakness in their property sector places a ceiling on demand for key Australian exports like iron ore, which is currently priced near $107 per tonne. This manufacturing slowdown in Australia could signal that domestic demand is weakening, adding to external pressures.

Reassessing The Soft Landing View

Looking back, we remember the optimism that was building in the final quarter of 2025 when it appeared the economy had achieved a soft landing. This March 2026 manufacturing report challenges that narrative and forces us to re-evaluate downside risks. It serves as a reminder of how quickly sentiment can shift based on new data. Create your live VT Markets account and start trading now.

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BNY’s Head of Markets Macro Strategy Bob Savage said the Bank of Korea (BoK) may consider policy easing if Middle East geopolitical shocks weigh on domestic growth. He said the new BoK governor is prioritising market stability and is more tolerant of South Korean won (KRW) weakness. South Korean President Lee Jae Myung instructed senior officials to take bold measures to address energy concerns linked to the war in the Middle East. He said the government may issue an emergency economic decree if needed.

Policy Signals And Market Stability

He downplayed foreign exchange risks and cited ample US dollar liquidity. He said exchange rate levels are not a concern if markets can absorb the adjustment, indicating tolerance for KRW weakness. He said policy easing may be necessary as the Middle East situation adds to economic difficulties. He also said any inflation impact from an extra budget would likely be limited under its current scale and design. The text also refers to foreign equity outflows and a relaxed response to KRW weakness. It says this affects the case for a bond-focused narrative as attention shifts towards oil shocks. With Brent crude recently pushing past $95 a barrel, we are seeing clear signals that the Bank of Korea may consider easing its policy. The new governor’s focus on market stability, even at the cost of a weaker won, suggests a pivot is coming to shield domestic growth from the energy shock. This is a notable change from the more hawkish stance we saw throughout most of 2025.

Derivative Positioning And Rate Cut Risks

The official tolerance for Korean won weakness is a major development, especially as we recall the interventions when the USD/KRW pair pushed above 1,380 last year. This comfort with a depreciating currency, justified by sufficient dollar liquidity, gives a green light for traders to position for further downside in the won. Derivative traders should anticipate higher volatility and consider pricing call options on the USD/KRW. Talk of emergency economic measures and a potential rate cut points directly to a shift in monetary policy. We saw the Bank of Korea hold its base rate steady at 3.50% for almost all of 2025, so a cut would represent a significant reversal. This outlook makes positions favouring lower short-term interest rates, such as in interest rate swaps, more compelling. The combination of a dovish central bank and an external energy shock provides a clear strategy for the coming weeks. The path of least resistance for the won appears to be weaker, potentially testing the 1,420 level we haven’t seen sustained since late 2024. Therefore, derivative strategies that profit from a declining KRW against the dollar and falling Korean interest rates should be considered. Create your live VT Markets account and start trading now.

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Key Points

• The Nikkei 225 rose 3.58% to 52,889.85, while the broader Topix gained 2.5% to 3,648.78.
• The BOJ Tankan showed large manufacturers’ sentiment at +17 versus a +16 forecast, while large non-manufacturers came in at +36 against a +33 forecast.
• WTI crude fell $1.28, or 1.24%, to $101.60, easing some pressure on Japan’s import-heavy economy.

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Japanese equities bounced hard after oil prices pulled back and Wall Street delivered a strong lead. The Nikkei 225 climbed 3.58% to 52,889.85, snapping a four-session losing streak, while the Topix rose 2.5% to 3,648.78.

Japanese shares rebounded after Donald Trump signaled the US aims to end its war with Iran within the next three weeks https://t.co/auPsWk4D0x

— Bloomberg (@business) April 1, 2026

Lower crude prices gave traders a reason to buy risk again. Japan imports most of its energy, so a drop in oil cuts pressure on company costs, household spending, and inflation expectations. Reports that Washington was willing to push for a diplomatic reopening of the Strait of Hormuz helped drive WTI down $1.28 to $101.60 per barrel.

The rebound was strong, but the market is still trading off headline risk. Oil remains high, and the Middle East conflict has not been resolved.

Tankan Data Supports the Bounce

The latest BOJ Tankan survey gave the market a second reason to rally. Large manufacturers’ sentiment rose to +17 in March from +15 in December, beating the +16 forecast. Large non-manufacturers improved to +36 from +34, ahead of the +33 forecast.

The survey showed firms were holding up better than expected even after the energy shock. Reuters also reported that large companies plan to raise capital expenditure by 3.3% in fiscal 2026, above the 3.0% median forecast.

That mix supported the rebound because it suggested the corporate sector had not rolled over. The outlook components were softer, though, so companies are still preparing for a tougher backdrop if energy prices rise again.

Global Markets Add Support

Wall Street handed Asia a strong lead. The Nasdaq rose 3.8%, the S&P 500 gained 2.9%, and the Dow added 2.5%. European markets also closed higher, with the CAC 40 up 0.6% and both the DAX and FTSE 100 up 0.5%.

The yen also moved away from the most pressured part of its recent range. Reuters reported it traded near 158.55 per dollar, firmer than the 160.46 low seen earlier this year.

The yen’s weakness has become a growing concern for Japan’s policymakers, given its impact on import prices and household costs. Here's what is causing the volatility – and what to look out for next https://t.co/N2eBTCDSfd

— Bloomberg (@business) March 31, 2026

A steadier yen reduces some of the stress around imported inflation, even if it trims part of the export boost from a weaker currency.

Technical Analysis

Nikkei 225 is trading near 53,130, attempting a modest rebound after a sustained pullback from the 60,077 high. Price action shows the market trying to stabilise after a series of lower highs and lower lows, though upside momentum remains limited as the index continues to trade below key resistance levels.

From a technical standpoint, the trend has shifted to neutral to bearish in the short term. Price is trading below the 10-day (52,609) and 20-day (53,380) moving averages, which are now acting as overhead resistance, while the 30-day (54,761) continues to slope downward, reinforcing the loss of upward momentum. The 5-day (52,234) is beginning to turn higher, suggesting a short-term bounce, but this remains corrective unless stronger follow-through develops.

Key levels to watch:

• Support: 50,500 → 48,000 → 47,000
• Resistance: 53,400 → 54,700 → 57,500

The index is currently testing the 53,300–53,400 zone, which aligns with the 20-day average and has capped recent recovery attempts. A sustained break above this area could open the way toward 54,700, where the 30-day average may present stronger resistance.

On the downside, 50,500 remains the key near-term support. A break below this level would signal renewed selling pressure and could expose a move toward 48,000.

Overall, the Nikkei 225 is in a corrective phase following its earlier rally, with price still struggling to reclaim key moving averages. Unless the index can push decisively above the 53,400 level, rallies are likely to face resistance, keeping the near-term bias tilted to the downside.

What Traders Should Watch Next

The next move depends on whether oil stays off the highs, whether the Iran conflict cools further, and whether Japanese data keeps showing resilience. Another drop in crude would support importers, banks, and domestic cyclicals. A fresh spike in energy prices would put inflation and margins back under pressure quickly.

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Trader Questions

Why Did the Nikkei 225 Rise So Strongly?

The Nikkei 225 rose 3.58% to 52,889.85 as lower oil prices eased pressure on Japan’s import-heavy economy and stronger global equities improved risk appetite.

How Did Falling Oil Prices Help Japanese Stocks?

Japan imports most of its energy, so lower crude prices reduce cost pressure on companies, ease imported inflation, and support household spending. WTI fell $1.28, or 1.24%, to $101.60 in the move that helped lift sentiment.

What Did the Tankan Survey Show?

The BOJ Tankan showed large manufacturers’ sentiment at +17 versus a +16 forecast, while large non-manufacturers came in at +36 against a +33 forecast. Large firms also planned 3.3% capex growth for fiscal 2026, ahead of the 3.0% median forecast.

Why Did Exporters, Banks, and Chip Stocks Lead the Rally?

Exporters benefited from improved global sentiment, banks tracked the rebound in cyclical risk appetite, and chip names followed the strong move in US tech. The session also showed broad participation, which gave the rebound more strength than a narrow bounce.

Why Did Inpex Lag The Market?

Lower oil prices reduced support for energy producers, and Inpex fell 2.6% while most of the broader market rallied.

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GBP/USD rose 0.32% on Tuesday to about 1.3230 in choppy trade, after moving between roughly 1.3160 and near 1.3260. The move ended a five-day losing run, with the wider fall still framed by the drop from about 1.3870 in January to around 1.3010 recently. The uptick followed reports that the US-Iran conflict may be nearing an end. The Wall Street Journal said President Donald Trump told aides he was willing to stop hostilities even if the Strait of Hormuz stayed largely shut, while the New York Post reported he expects the war to end soon.

Focus Shifts To Upcoming Us Data

Attention now turns to US data, with little UK data due this week. The Bank of England held Bank Rate at 3.75% in March and next decides on April 30, while the Federal Reserve held 3.50% to 3.75% and the US releases due include ADP Employment Change (40K consensus), February retail sales (0.5% MoM), ISM Manufacturing PMI (52.5), and Friday’s NFP (60K), with Good Friday likely to thin liquidity. On the 5-minute chart, GBP/USD was near 1.3228 with support at 1.3220, 1.3215, and 1.3205, and resistance at 1.3235, 1.3245, and 1.3260. On the daily chart, it was near 1.3229 with support at 1.3185, 1.3130, and 1.3050, and resistance at 1.3330, 1.3380, and 1.3450. We recall how a year ago, in March 2025, GBP/USD saw a temporary bounce to 1.3230 on fleeting hopes of a US-Iran de-escalation. That relief rally occurred within a broader downtrend from the 1.3870 highs seen in early 2025. The market at that time was dominated by geopolitical risk and the beginning of a major central bank holding pattern. Those peace hopes proved optimistic, as continued tensions in the Strait of Hormuz kept energy prices elevated for the remainder of 2025, with Brent crude averaging over $95 a barrel in the third quarter. This persistent energy shock forced central banks to maintain a restrictive stance longer than anticipated. Looking back, the brief dip-buying interest near 1.31 was a false dawn before the next leg lower. Now, in April 2026, the entire interest rate landscape has shifted from the firm holds we saw in 2025. The Bank of England is holding its Bank Rate at 4.25%, but with the latest inflation report showing UK CPI has fallen to 3.1%, the market is pricing in at least two rate cuts by year-end. Similarly, while the Federal Reserve rate is at 4.50%, weakening economic data has futures markets implying a 70% chance of a first cut by September.

Derivatives And Technical Levels In View

The strong US data that was anticipated back in March 2025 has given way to a much softer picture today. The most recent US Non-Farm Payrolls report came in at just 95,000, well below consensus and a sharp contrast to the positive numbers seen through much of last year. This slowdown confirms that the tight monetary policy from both the BoE and the Fed is finally weighing on economic growth. For derivative traders, this environment of high uncertainty about the timing of rate cuts suggests volatility is underpriced. We see value in buying GBP/USD straddles with a three-month expiry to capture a potential sharp move once either the BoE or the Fed signals a definitive policy pivot. Implied volatility for at-the-money options recently fell to 6.8%, a low not seen since late 2024, presenting a cheap entry for long-volatility positions. Given the technical picture, the 1.3000-1.3200 zone, which acted as support in early 2025, has now become a major resistance area. A cautious bullish strategy could involve buying out-of-the-money call options with a 1.3000 strike price, targeting a longer-term move up as the Fed begins its easing cycle. This provides a low-premium way to position for a recovery while defining risk in case UK economic weakness continues to weigh on the pound. Create your live VT Markets account and start trading now.

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USD/JPY fell 0.62% on Tuesday for a second day, ending near 158.70 after failing near 160.00. It dropped below 159.00 for the first time in over a week, with selling concentrated near recent highs around 160.50. The move followed reports that the White House may halt military operations against Iran, which reduced demand for the US Dollar as a defensive asset. The S&P 500 had its best one-day rise since the conflict began, while US Treasury yields fell.

Key Us Data And Fed Context

The Federal Reserve kept the federal funds rate at 3.50% to 3.75% in March. US releases due Wednesday include ADP Employment Change (40K consensus), February retail sales (0.5% MoM consensus), and ISM Manufacturing PMI (52.5 consensus). Friday’s Non-Farm Payrolls is expected at 60K and is released on Good Friday. Low holiday liquidity may intensify reactions. In Japan, the Bank of Japan’s March Summary of Opinions included a possible larger rate rise, with the policy rate at 0.75%. Tokyo CPI eased to 1.4% YoY from 1.5%, core CPI to 1.7% versus 1.8% expected, and unemployment to 2.6% versus 2.7% consensus. On a 5-minute chart, price is 158.82, below the 200-period EMA near 159.20, with resistance at 159.00, 159.20, and 159.50. Support is at 158.70, then 158.50 and 158.20.

Technical Levels And Market Structure

On a daily chart, price is 158.82, above the 50-day and 200-day EMAs, with support at 158.00, 157.00, 155.50, and the 200-day EMA near 153.90. Resistance is 160.00 and 161.50. Looking back at the analysis from this time in 2025, we can see the strong rejection of the 160.00 level was a pivotal moment. The turn in risk appetite showed just how quickly the dollar’s safe-haven status could unwind. That price action is a crucial reminder of how sentiment can shift near major psychological barriers. Today, we are facing a similar situation but at a higher level, with USD/JPY testing 162.50 and verbal warnings from the Ministry of Finance increasing. While last year’s catalyst was geopolitical, this year’s tension is fueled by last week’s US Core PCE inflation data for February, which came in at 3.1% and complicated the Federal Reserve’s path toward further rate cuts. This has put the pair in a precarious position, reminiscent of the peak we saw in 2025. The policy divergence story that drove the pair up has also changed. In early 2025, the Fed was holding rates firm while the Bank of Japan was only beginning to message future hikes from a 0.75% base. Now, with the Fed having delivered two cuts to a target of 3.25% and the BoJ at 1.0%, the interest rate gap is actively narrowing, which could add fundamental weight to any sharp reversal. Given the heightened risk of official intervention, traders should use derivatives to define their risk in the coming weeks. Buying Japanese yen call options (or USD/JPY put options) offers downside exposure with a known, capped cost, a prudent strategy when a sudden 300-pip drop is a real possibility. A put spread targeting a move back toward the 160.00 breakout level could also be an effective way to position for a pullback at a lower premium. We are seeing one-month implied volatility for the pair trading around 11.5%, which is significantly higher than the 8.0% average we saw in the fourth quarter of 2025. This reflects the market pricing in a sudden move, much like the volatility spikes seen before the major interventions of 2022. The higher cost of options is the price for protection against a sharp decline, a trade-off many should be willing to make at these levels. Create your live VT Markets account and start trading now.

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