- USD/JPY awaits the G20 outcome with the mixed sentiment in the lead in keeping price in a tight range.
- The retreats below 108.00 signals that the descending channel in the daily chart remains in place.
USD/JPY was unchanged overnight at 107.75, moving down from a short spell on 108 handle printing a high of 108.16. In Tokyo, the pair is currently trading at 107.70, having ranged between 107.65 and 107.82. The markets are in anticipation of the G20 events this weekend being held in Japan.
Overnight, the Wall Street Journal explained that China will insist the US remove its ban on US technology sales to Huawei and lift existing tariffs on Chinese imports. Chinese media and commentators have also been discouraging. However, risks can get a lift should there be an agreement to a ceasefire and USD/JPY’s upside would be compelling on a rally in global equities. Considering the Fed’s assessment of the headwinds, such a positive outcome would also dial down expectations of aggressive Fed cuts, potentially shaking out the bears and speculative positions recently taken up which has weighed heavily on the greenback. Markets are pricing 33bp of easing at the July meeting, with a total of four cuts priced by mid-2020.
US GDP comes in line
As for US data, the US pending home sales rose 1.1% in May, close to expectations, a welcome gain aided by lower interest rates. Analysts at Westpac also noted the key US Q1 GDP outcome, “Growth was left unrevised at a 3.1% annualised pace; consumer spending was nudged lower while business investment was stronger than previously estimated. The lack of any meaningful revisions leaves Q2 GDP growth tracking estimates largely untouched at around 2%.”
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Japan’s data dump sees CPI higher by 0.1% and Unemployment in-line
USD/JPY levels
Valeria Bednarik, the Chief analyst at FXStreet explained that looking at the technical picture, the rally of USD/JPY was capped by the strong 108.15 zone and finished practically flat, signaling that the greenback would need more arguments in order to break that level:
“The area at 108.10/15 is where the 20-day SMA, a downtrend line and a horizontal resistance converges. A consolation above will likely signal a bottom and point to more gains over the next days. The next strong resistance is 108.00. The move lower from 108.15 and the retreat below 108.00 signals that the descending channel in the daily chart remains in place. However, ahead of the Asian session, not much should be expected. The bias points to the downside and it could drop to 107.50 (horizontal / 20 SMA in four hours chart), below that level will reinforce the mentioned outlook.”
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