USD/JPY on the back foot in Tokyo open following trade talk gloom and doom

• The Yen picked up a safe-haven bid as traders and investors moved away from risk-on trade talk update.
• US and China make no progress on key trade issues in two days of deputy-level talks.

USD/JPY is opening in Tokyo on the backfoot following the latest headlines surrounding the US and Chinese deputy-level trade talks.

In recent trade, the Yen picked up a safe-haven bid as traders and investors moved away from risk following reports in The South China Morning Post which cited deputy-level trade negotiator’s sources saying the following:

• US and China make no progress on key trade issues in two days of deputy-level talks, sources say.
• The Chinese delegation refuses to talk about forced technology transfers, a core US grievance in the negotiations, a person with knowledge of the meetings says.
• High-level talks are expected to last for only one day, with Liu He and his team now planning to leave Washington on Thursday.

FOMC minutes reflected a generally positive outlook

Meanwhile, as explained by analysts at Westpac, “the Sep FOMC minutes reflected a generally positive outlook from policymakers, although “many” thought that low inflation plus the risks from trade wars and the global slowdown justified September’s rate cut. A “few” worried that the market was pricing too much easing, and “several” wanted the statement to have more clarity on when the easing would likely end.”

Subsequently, the USD/JPY rose from 107.20 to 107.50/60, following US yields whereby the  2-year treasury yield climbed from 1.42% to 1.47% and the 10-year yield from 1.53% to 1.59%. “Markets are pricing 17bp of easing at the 31 October meeting and a terminal rate of 1.00% (vs 1.88% currently),” the analysts at Westpac explained.  

USD/JPY levels

USD/JPY has dropped below the 21, 50 and 200 daily moving averages and is threatening  a break below the 107 handle and double bottom support seen in September’s business. A break of which will open risk back to the October lows of 106.48. 105 is the ultimate bear target.