Dollar/yen was unable to hold onto its gains as dollar strength was substituted by a risk-off atmosphere that benefits the Japanese yen. Tariffs remain in the limelight but we also have US inflation and retail sales in the mix.
USD/JPY fundamental movers
Tariffs and more tariffs, a good NFP, and a bit of EM concern
The deadline for public comments on the tariffs on $200 billion worth of Chinese goods ended. While the US did not announce the implementation of these duties, President Donald Trump already touted further levies on an additional $267 billion worth of products. This weighed on markets as the week drew to an end.
Earlier, the mood changed according to developments in Brexit, which went both ways. A report about the UK and Germany dropping their demands was later denied, but it helped markets and USD/JPY. Another factor was Emerging Markets. Nothing was resolved in Argentina and Turkey but there were no new adverse developments.
The Non-Farm Payrolls came out better than expected with 201K jobs gained. More importantly, wages advanced by 0.4% m/m and 2.9% y/y. This strengthens the odds of a fourth rate hike this year, in December. A September hike was already priced in before the event.
More trade and also key US data on Thursday and Friday
An announcement on the implementation of the new tariffs seems imminent and may upset markets, sending the pair lower. It is not fully priced in. Further developments on the Brexit front or in various Emerging Markets could also have their say. Turkey makes its rate decision on September 13th.
In the US, the inflation report is released on Thursday and is unlikely to continue climbing. Core CPI reached 2.4% last month. On Friday, retail sales also carry relatively moderate expectations for the August report after a robust July. Japan will publish its final GDP number which is unlikely to move markets.
See all the main events in the Forex Weekly Outlook
Key news updates for USD/JPYUpdates:
USD/JPY Technical Analysis
113.15 is the high point seen in July. 112.15 was a swing high early in the month.
111.80 was a peak in the dying days of August and serves as resistance. Close by, 111.50 capped the pair beforehand and is another barrier.
110.60 was a swing low in late July and then again in late August. 109.70 was a swing low in late August and provides extra support below the round 110 level.
Close by, 109.35 was a cushion in mid-July. 108.70 was a cushion early in the summer and 108.10 a swing low in late May.
Lower, we find 107.50 capped the pair in early April and is a strong line.
USD/JPY Daily Chart
I remain bearish on USD/JPY
Tariffs, those about to be implemented and new ones, are set to hurt stock markets and this is the missing ingredient in the yen’s safe haven status.
Our latest podcast is titled Brexit summer blues, trade troubles
- EUR/USD forecast – for everything related to the euro.
- GBP/USD forecast – Pound/dollar projections
- AUD/USD forecast – analysis for the Aussie dollar.
- USD/CAD forecast – Canadian dollar predictions