- USD/JPY is currently trading at 108.40, giving back some opening gains.
- USD/JPY has traded between 108.36/55 for far at the start of the week.
- Daily chart for the USD/JPY pair indicates that the bearish potential remains firmly in place.
On the data front, we have seen Japan’s data – Final GDP for Quarter (Q/Q) 1 arrived at 0.6% q/q (preliminary was 0.5%) which was largely ignored, and instead, markets are focused on the geopolitics. However, the breakdown of the data arrived as follows:
- Japan GDP Annualized SA (Q/Q) 1Q F: 2.2% (est 2.2% ; prev 2.1%).
- Japan GDP Nominal SA (Q/Q) 1Q F: 0.8% (est 0.8% ; prev 0.8%).
- Japan GDP Private Consumption (Q/Q) 1Q F: -0.1% (est -0.1% ; prev -0.1%).
- Japan GDP Business Spending (Q/Q) 1Q F: 0.3% (est 0.5% ; prev -0.3%).
As for geopolitics, late on Friday, Trump Tweeted,
“… the tariffs scheduled to be implemented by the U.S. on Monday against Mexico are hereby indefinitely suspended – Mexico has agreed to take strong measures to stem the tide of Migration through Mexico … details of the agreement will be released shortly by the State Department”…
There was no market to trade and instead the Aisa session has sen a risk on start, albeit with a lack of volume due to Australia being out ahead of a holiday in Europe today. Meanwhile, the G20 of finance leaders met over the weekend, noting that geopolitical tensions have “intensified”, which are raising risks to improve global growth. As for the US/China stand-off, U.S. Treasury Secretary Steven Mnuchin did meet with People’s Bank of China (PBOC) Governor Yi Gang in the first meeting of high-level U.S. officials in a month.
Mnuchin described the meeting as “constructive” and “a candid discussion on trade issues”, although we have not had any further details from it than that. Mnuchin said that U.S. President Donald Trump and Chinese President Xi Jinping would meet at a June 28-29 G20 summit in Osaka, but the meeting has not been confirmed by China.
Looking ahead this week, the US CPI data will be key, especially following the Nonfarm Payrolls data:
May non-farm payrolls rose an underwhelming 75k, echoing the weakness seen in the ADP report earlier in the week. Jobs growth softened in most sectors with manufacturing jobs – a key focus of the Trump administration – adding just 3k. See Fed commentary below.
Analysts at ANZ Bank explained.
USD/JPY levels
Valeria Bednarik, the Chief Analyst at FXStreet, explained that the daily chart for the USD/JPY pair indicates that the bearish potential remains firmly in place, as the pair is developing well below a bearish 20 DMA which maintains its downward slope below the larger ones:
The Momentum indicator in the mentioned chart extended its decline within negative ground, while the RSI indicator heads marginally lower, holding near oversold readings. Shorter term, and according to the 4 hours chart, the technical picture is also bearish, as the pair retreated following a test of the 48.2% retracement of its latest decline at 108.60, now below a flat 20 SMA. Technical indicators in the mentioned chart bounced from daily lows, the Momentum advancing within neutral levels and the RSI at around 45, falling of short of supporting an upcoming advance.
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