USD/JPY back below the 111 handle on fresh trade war angst

• Trump administration is reportedly planning to publish a list of ‘new’ tariffs that are to be imposed on $200 billion worth of Chinese goods.
• We have NATO coming up this week and trade war angst is bound to take a front seat again.
• Meanwhile, there has otherwise been an upbeat tone on the street today, with equities firmly bid that lead to USD/JPY breaking out and making the best finish in NY since early January.

USD/JPY is losing the 111 handle in early Asia on the back of trade war noise whereby the Trump administration is reportedly planning to publish a list of ‘new’ tariffs that are to be imposed on $200 billion worth of Chinese goods. USD/JPY has dropped from 111.27 and made a fresh low of 110.82, currently trading at 110.94.

Meanwhile, there has otherwise been an upbeat tone on the street today, with equities firmly bid that lead to USD/JPY breaking out and making the best finish in NY since early January. However, fundamentally, the pair can only survive around the cloud base and well-defined downtrend from 2015 at 111.39/55 so long as a firmer Treasury-JGB yield spread can and how long the respite in risk-off sentiment lasts.  

We have NATO coming up this week

We have NATO coming up this week and trade war angst is bound to take a front seat again. However, there could be a significant breakout on central bank divergences in the pair so long as the bulls can close through the said levels, or indeed, at least for the short term, hold above the daily Tenkan at 110.66. Thursday’s CPI is a key data event this week that may or may not fit the Fed’s bill while otherwise, the Goldilocks jobs report did just that and keeps the focus on the upside for the time being.  

USD/JPY levels

While USD/JPY has been approaching the 111.39 recent high and the 2015-2018 downtrend a deeper correction down to the 55-day ma at 109.96 and the 8th June low at 109.20 could prove problematic to trapped bulls. A break there opens up risk right back to the 108.21 29th May low and the mid- February high at 107.91. Otherwise, a breakout to the upside can target and the long-term downtrend line and weekly Cloud top at 111.47/70.