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USD/JPY: Heavy near two week low amid fresh US-China trade war fears

  • USD/JPY fades bounce off 105.66 to extend Monday’s losses.
  • Welcome data from Japan, Suga’s election victory earlier strengthened the yen.
  • US blocks certain Chinese products citing the use of forced labor.
  • Increasing odds of no-deal Brexit confronts China’s vaccine hopes.

USD/JPY is off intraday low of 105.66, currently around 105.70, amid the initial hour of Tokyo open on Tuesday. The risk barometer remains on the back foot for the second day in a row as fresh challenges to the market sentiment strengthened the previously positive Japanese yen (JPY).

Sino-American tussle continues…

The Trump administration banned the import of certain apparel and computer parts from China while saying they are made by forced laborers from the Xinjiang region, as per the Washington Post. The news follows the US State Departments’ upward revision to the travel advisory to Beijing and Hong Kong. Earlier, China’s Commerce Ministry launched an anti-dumping investigation on certain glycol ethers imports from the US, effective from August 31, per Reuters.

Other than the fears of a full-fledged trade war between the world’s top two economies, increasing odds of the no-deal Brexit, following the passage of the UK’s Internal Market Bill, adds to the market’s cautious sentiment.

Furthermore, the US warnings over the AstraZeneca’s restart of vaccine trials and China’s optimism concerning the coronavirus (COVID-19) vaccine are certain other risk catalysts that recently affected the market’s mood.

As a result, S&P 500 Futures drop 0.10% to 3,370 whereas Japan’s Nikkei drops 0.80% amid the early trading hour.

It should, additionally, be noted that Yoshihide Suga’s victory in Japan’s ruling Liberal Democratic Party’s (LDP) Presidential Election and the early Monday’s upbeat readings of Industrial Production also favor the Asian currency.

Looking forward, China’s August month data dump will offer immediate direction to the trading sentiment while risk factors and updates from Japanese politics will be the key to watch afterward.

Technical analysis

Sustained break of an ascending trend line from July 31, at 105.80 now, directs the quote to a late-August low near 105.20. Meanwhile, the 50-day SMA level near 106.25 becomes the key upside barrier to follow during the quote’s fresh rise.


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