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Dollar/yen  had a relatively stable week in the mid 110s. This sideways movement came despite big events in the US and the imposition of trade tariffs. Will the pair finally move now? Inflation and further trade skirmishes are eyed. Acrimonious  talks between US Secretary of State Mike Pompeo and his North Korean counterparts in Pyongyang had little effect on the pair.

Update: USD/JPY is enjoying the better market mood and finally moving to the upside. This comes despite acrimonious sounds from North Korea and no resolutions on trade. The rise in stocks supports the pair. The pair reached the highest levels since January 12th as the US Dollar continued rising. US PPI came out above expectations.

USD/JPY  fundamental  movers

Weak wages, trade taken with a stride

The US jobs report beat expectations on the headline with 213K but disappointed on wages which remained unchanged at 2.7% y/y and rose by only 0.2% m/m. The news weighed on the US Dollar in the final day of the week.

Beforehand, the FOMC Minutes remained very bullish on the economy but did expand their concerns about trade relations. The publication was perceived as dovish and also contributed to the dollar’s downing.

The US imposed tariffs on $34 billion of Chinese goods on Friday and China responded with counter-tariffs. The move was anticipated by markets and did not result in any adverse impact on the markets.

Inflation, consumer sentiment  

The most important economic indicator of the week is due on Thursday and the focus is on the Core CPI year over year. After it edged up from 2.1% to 2.2%, another advance is on the cards. Higher inflation supports further rate hikes. Even if the Fed is concerned about trade wars, it cannot abandon its mandate.

Another notable event is consumer sentiment due on Friday and it has the last word of the week. It has been quite stable in recent months, standing around 98.

See all the main events in the Forex Weekly Outlook

As usual, Japanese events are unlikely to play a role in moving the pair, but developments around North Korea could. US Secretary of State Mike Pompeo traveled to Pyongyang and negotiations are ongoing.

And the most important issue remains trade. How long can markets take it with a stride? Further actions by the US and China could impact the pair.

Key news updates for USD/JPY

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USD/JPY Technical Analysis

112.20 supported the pair back in December. It is followed by 111.40 which capped the pair in mid-May.

Further down, 110.90 was a high point in February. Further down, 110.25 provided support in early July.

109.30 was a low point around late June. 108.70 was a stepping stone on the way up. 108.10 was a low point in late May and serves as a support line.

Lower, we find 107.50 capped the pair in early April and is a strong line.

USD/JPY  Daily Chart

USD/JPY Sentiment

I remain bearish on USD/JPY

At one point or another, the safe-haven yen will find demand as trade wars worsen. This summer stability also cannot continue forever.

Our latest podcast is titled  Truce in trade and dollar domination

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Safe trading!