USD/JPY Forecast September 2-6 – Further salvos in U.S-China trade war boost yen

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Dollar/yen gained close to 1.0% last week, its best weekly gain since mid-July. What’s next for the yen? U.S. data includes nonfarm payrolls and wage growth, but escalating trade tensions between the U.S. and China will also be in focus.

USD/JPY fundamental movers

In the U.S., it is becoming increasingly clear that second-quarter growth will be significantly weaker than Q1, and there is a strong likelihood that the Fed will introduce further rate cuts in 2019. Second-estimate GDP for Q2, came in at 2.0%, matching the estimate. This was a slight downward revision from initial estimate, which came in at 2.1%. Durable goods orders improved to 2.1%, up from 2.0% a month earlier. However, core durable goods orders declined by 0.4%, the first decline in six months. The week wrapped up with UoM consumer confidence, which dropped sharply to 89.8 in July, down from 98.4 in June. This marked the first time that the key confidence indicator has dropped below the 90-level since October 2014.

The U.S-China trade war has escalated, as new tariffs on both sides took effect on September 1. The U.S. imposed new 15% tariffs on $125 billion worth of Chinese goods, while China has retaliated with new tariffs of 5% and 10% on an unspecified value of U.S. goods, including oil imports.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

109.73, which has held in resistance since the end of May. 109.35 is close by.

108.70 follows.

108.10 was a swing low in late May.

107.30 has held in resistance since the first week in August.

106.61 remains relevant.

105.55 (mentioned last week) has switched to support after the pair started the week with strong gains.

104.65 is next.

The round number of 104 was a key line in May 2008.

102.50 is the final support line for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bearish on USD/JPY

The trade war between the U.S. and China has escalated significantly, which could dampen investor appetite and boost the safe-haven yen. As well, the strong possibility of further rate cuts by the Fed in 2019 could boost the Japanese currency.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.