- Geopolitics, trade woes keep challenging market sentiment.
- The economic calendar also falls short of changing the mood.
With disappointment from China’s PMI joining the US-led trade protectionism and further fueling risk aversion, USD/JPY drops to fresh lows since mid-May before trading near 109.25 during early Friday.
Risk-off moves gained momentum since the initial Asian session when the Iran-Iraq tension wooed global investors towards safe-havens.
However, the tone turned heavier after the US President Donald Trump announced fresh tariffs on Mexico to push the trade partner towards no illegal migration into the US. In retaliation, Mexican authorities also turned red but refrained from any trade negative measures.
Adding to the pessimism was China’s May month purchasing manager index (PMI). Among them, manufacturing PMI slipped below-50 level indicating a contraction in activity to 49.4 versus 49.9 forecasts and 50.1 prior. Further, Non-manufacturing PMI remained unchanged at 54.3 but lagged behind 54.5 expected.
Furthermore, trade catalysts from China have also started providing additional burden to analysts as not only comments from Chinese lawmakers but repatriation of the US workers by Huawei also played its role.
It should also be noted that early-day release of Japan’s inflation data remained mostly unchanged but industrial production and retail sales registered mixed outcomes.
The US 10-year treasury yield, a barometer of global risk sentiment, also signals red as it trims nearly 4 basis points to the lowest since September 2017 by being at 2.182%.
Looking forward, the US personal income, spending, Chicago PMI and Michigan consumer sentiment index are also likely to gain market attention while traders seek news concerning politics and global trade.
Technical Analysis
The current month low near 109.00 becomes crucial now as a break of which can further fetch the quote southwards to late-January lows around 108.50 and then to 107.80 during additional declines.
Should prices take a U-turn from now, 109.80 and 110.30 may limit nearby upside ahead of highlighting 110.70/80 area comprising 50-day simple moving average (SMA) and last week’s high.
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