USD/JPY: Intensifying trade war portrays a bearish opening gap at the week-start

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  • USD/JPY begins the trading week with a bearish gap surrounded by the US-China trade war.
  • China announced fresh tariffs in retaliation to the US levies on $300 billion of Chinese goods, the US President Donald Trump returned the favor with an additional burden.
  • Absence of hawks at the Jackson Hole added rush to risk-safety.

Global traders respond to the escalation in the US-China trade war, and absence of hawks at the Jackson Hole, with the USD/JPY pair’s bearish gap to 104.97 at the start of Monday’s Asian session.

While the US Fed Chair Jerome Powell’s refrain from being hawkish initially pushed investors to safe-havens like the Japanese Yen (JPY), China’s tariffs on the US goods and the US President Donald Trump’s tweets after the market close on Friday pushed propelled the run to risk-safety.

The Fed Chair Powell warned about significant economic risks at the Jackson Hole Symposium while reiterating that the Fed will appropriately maintain the expansion.

While everybody was eagerly waiting for the Fed Chair’s comments from the Jackson Hole, the US President Donald Trump grabbed his twitter handle to respond various punitive measures for China after the dragon nation announced fresh tariffs on the US goods worth of $75 billion starting from September 01 and December 15 on some items including the autos.

The US President Trump mentioned that 10% levy on $300 billion of Chinese goods would be raised to 15% from September 01 (and December 15 in some cases) and the existing 25% levy on $250 billion of Chinese goods would lift to 30% from October 01. Additionally, the US President urged some of the US companies to pull out of China.

Chinese media responded by showing the readiness for the further trade war, which in turn was tamed by the US President’s regret of not levying additional tariffs on the dragon nation.

On the positive side, the US and Japan agreed in principle to a trade deal at the G7 over the weekend.

With the trade war between the world’s two largest economies in its top-gear, investors keep turning riskier assets down and prefer safe-havens like the Japanese Yen (JPY) and Gold. It also weakens the global equities and drags the bond yields, which could be witnessed in nearly seven basis points reduction in the US 10-year Treasury yield.

Moving on, Japan’s Leading Economic Index for June the US Durable Goods Orders for July will decorate the economic calendar while trade news will keep busying the markets.

Technical Analysis

January month low near 104.75 and March bottom surrounding 104.63 act as immediate supports ahead of pushing traders to sub-104 area. On the upside, June low of 106.78 becomes the tough nut to crack for buyers.

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