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Robert Rennie, Research Analyst at Westpac, suggests that they remain torn between positive US$ fundamentals on the one hand and the potential for all out trade war/ increased EM volatility on the other, but they have noted for many weeks that even in the midst of a significant deterioration in China/ US/ EU trade relations, USD/JPY could not break below 109.50.

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“Wednesday’s price action was even more bizarre with USD/JPY breaking above 111.50. Thus the path of least resistance appears to be higher for now, though we remain concerned that next week’s ‘section 232’ auto hearings could shift ¥ sentiment.”

“Thus, we stick with a ‘trade wars warrants caution’ near term view but more positive bias medium term.”