- USD/JPY has just made a fresh low on the way down to the 55-DMA (110.69) having penetrated the 50-D SMA – embarking on stop territory here.
- Trade wars are cause for concern again as a key theme in markets.
- US yields unable to get over the 3% mark as the 10-yr Tsy-JGB spreads narrow.
USD/JPY has been on the backfoot with US yields unable to get over the 3% mark as the 10-yr Tsy-JGB spreads narrow and cast an air of caution on longs while the price is unable to get above the 5th August highs and hold conviction towards the 21-D SMA at 111.64. In overnight markets, the USD/JPY was consolidating yesterday afternoon’s drop below the 111 handle to a low of 110.85 – the first time the pair had crossed that level since 30th July but more importantly, the price pierced below the rising trend line support again.
US-China trade wars creating angst in markets
This just in:
On the back of the latest confirmation of additional tariffs on China whereby 25 per cent extra in tariffs will be applied on $16 billion of Chinese goods from Aug. 2, and indeed, China retaliating and stepping up the ante with its own decision to unveil fresh tariffs on $16bn of American goods which included medical equipment, fish meal, wood waste, paper and paper waste, metal scraps, cars, fuels, and bicycles, China’s state broadcaster CCTV is now saying that China has the confidence to protect its own interests as well as the means to do so and that it must counteract tariffs implemented by the United States.
Fundamentally, there is a heightened sense of risk associated with the Chinese/US standoff immersed within a tit-for-tat trade spat, and deeper, the Chinese are the largest holders of US Treasuries which is indeed a more profound risk for the dollar. However, that is jumping the gun a little at this stage, but the mere fact that there seems to be no end in sight, some analysts actually speculate that China will come out on top if this continues because it is playing the game more skillfully – while the US is starting to isolate its self from its international partners while China remains committed to them.
USD/JPY levels
Valeria Bednarik, chief analyst at FXStreet explained that the pair headed into the Asian session retaining its short-term negative tone, according to technical readings in the 4 hours chart, as it was developing below its 100 and 200 SMA, but more relevant, below the mentioned 111.20, a Fibonacci level, now the immediate resistance:
“Technical indicators in the mentioned chart have extended their declines within negative levels, with the RSI approaching oversold readings but giving no signs of changing course. Below the daily low, the pair has room to test July 26 low at 110.58, while a steeper decline is expected below this last toward the 110.00 figure.”
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