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  • USD/JPY continues to bleed out in the Tokyo open as investors look ahead to US  CPI and PPI data as next risk.
  • USD/JPY is currently trading at 110.41, down from an Asian session high of 11058, having printed a fresh low of 110.36, so far.  

The markets are jittery due to a mixed economic backdrop as well as conflicting headlines related to trade negotiation progress between the US and China. Brexit is also a thorn in the side of the bulls as PM May drags negotiations into the eleventh hour, although losing support in The Commons overnight, jeopardising her stature as she tries to gain concessions from the E.U.  

First of all,  US retail sales posted a steep 1.2% fall in December, the largest monthly decline in nine years and well below consensus expectations for a 0.1% gain as analysts at Westpac noted:

“Weakness was broad-based with eleven of thirteen categories posting declines, while the control group, a subset of retail sales that  is  used in GDP calculations fell even more sharply, by 1.7%, their largest fall since 2001. The weak data does not fit the picture of a healthy jobs market and steady wage gains, though it coincides with the turmoil in markets in the month and may also reflect the partial government shutdown which began 22 December.”

As for rates, the US 10yr treasury yield dropped from 2.71% to 2.64% in a large part due to the retail sales data. 2yr yields fell from 2.54% to 2.48%.

US trade talks with China under scrutiny

As for trade negotiations, the US and China “have made little progress so far” during talks in Beijing, according to a Bloomberg story repeating the information. Corporate governance  and structural reforms are –  “an extremely sensitive issue that is seen as a non-starter for Chinese leaders,”  the Bloomberg story argued, adding,  “The hurdles raise questions about whether negotiators can meet Trump’s criteria for pushing back the March 1 deadline for more than doubling tariffs on $200 billion of Chinese goods”  – That is Aussie dollar negative and potentially U.S. dollar bullish.

For the day ahead, China CPI and PPI   is tap:

  • When is China CPI/PPI and how could it affect AUD/USD?

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that the daily slump could be considered corrective at the time being:

“In the 4 hours chart, the price remains well above its moving averages, while technical  indicators  lost downward momentum once nearing their midlines. Nevertheless, the slide could extend in the short-term if the pair loses the 110.45 level, now the immediate support. Beyond the mentioned 111.12 high, the pair has room to extend its advance up to the 111.40 price zone, where it hast the 100 DMA and a relevant high from late December.”