USD/JPY drops to 108.50 area on Trump’s latest tweets on trade

• US Dollar Index floats above 98 ahead of inflation data.
• 10-year US Treasury bond yield inches lower toward 2%.
• US President Donald Trump says no signs of China buying US agricultural products.

The USD/JPY pair started the week on a positive note and inched higher toward the 109 mark on Monday but failed to preserve its bullish momentum on Tuesday. As of writing, the pair was losing 0.25% on the day at 108.50.

Trade optimism fades on Trump comments

US President Donald Trump’s latest remarks on the US-China trade conflict further weighed on the pair by pushing investors toward  safe-havens. As high-level  negotiations are ongoing in Shanghai, Trump said, via Twitter, that there were no signs of China buying agricultural products from the US as promised.

“The deal that they get will be much tougher than what we are negotiating now or no deal at all. We have all the cards, our past leaders never got it!” Trump said on the possibility of China waiting until the next presidential election in the US with hopes of striking a deal.

Reflecting the sour market sentiment, the 10-year US Treasury bond yield continued to edge lower toward the critical 2% mark and the S&P 500 Futures was last down 0.43% on the day, hinting that Wall Street is likely to start the day deep in the negative territory.

Eyes on US inflation data

In the second half of the day, investors will also be paying close attention to the Personal Consumption Expenditures Price Index data published by the US Bureau of Economic Analysis to see if soft inflation is temporary or persistent. This week’s key event without a doubt will be the FOMC meeting, at which policymakers are expected to vote in favour of a 25 basis points rate cut.  

Technical levels to watch for