One trade deal down and one to go USD/JPY analysis
Did the FED meet expectations?
Everyone waited last week for Friday and the speech by Fed Chair Jerome Powell to see if he drops any hits on further monetary easing. The Feds tone was demure, he made no notion that rates were going to be cut in September or in the near future. Instead he stated that the FOMC will continue to carefully monitor the situation. There are many things that are acting together and posing a risk to the global economy, primarily the US-Sino trade war but let’s not forget Brexit tensions, Hong Kong protests, German economic slowdown and the government collapse in Italy. Federal Reserve Vice Chairman Richard Harris Clarida admitted that the global outlook has worsened but the U.S. economy is in a good place and the consumer is strong.
A fresh wave of Trade War escalation came about the same time as the FEDs speech on Friday when China announced $75B worth of additional tariffs on the US, as a countermeasure to the additional tariffs imposed by Trump in the beginning of August.
As a result, the US Dollar fell and safe haven assets like Gold rallied. But as we all know, lately the market is more unpredictable than ever. While Trump was meeting with world leaders in France at the G7 summit, he stated that Chinese officials contacted the U.S. trade counterparts and wanted to continue with “calm” negotiations. According to Vice Premier Liu He – China is resolutely opposing the escalating conflict. The market was quick to react. GOLD opened with a bullish GAP to the downside and pairs like USDJPY opened with a bearish GAP to the upside.
Lets look at USD JPY:
Fundamentally, this week, Thursday will be an exciting day for USD JPY. US will released their GDP figures along with other reports at 12:30 GMT and Japan will follow with Core CPI, Industrial Production and Retail sales. It’s also worth noting that US President Trump and Japan Prime Minister Abe met this weekend at the G7 summit. Terms of trade were discussed, with agricultural goods, cars and car parts being the main focus. A draft agreement may be signed as early as the end of September, that will keep US import tax at 2.5% on Japanese cars with no additional tariffs, as was threatened earlier by Trump and Japan will in turn, gradually lower tariffs on imported beef from 38.5% to 9%.
Technically, on the 4HTF we see a bearish candle following Mr. Powells speech and the announcement of additional US-Sino tariffs on Friday and then Monday morning opened with rejection of lower prices and bullish momentum following a GAP down. The pair has created a new low of 2019 at 104.446. The price has, since Friday, retraced more than 61.8% to the upside, but Parabolic SAR remains bearish and MACD also indicates that short positions look to be more favorable.
As a result: A move down may be considered after the price break the 23.6% Fibo (105.596) down, which should coincide with the price closing below the 9 EMA. First target down will be at strong area of support around 105.271, following will be the January low and todays new low in the area of 104.656 – 104.447. After that, the pair may revisit 2016 lows in the area of 104.137.
If on the other hand there is news released that is aimed at de-escalating the US-Sino trade war, such as positive trade talks the pair may rise with target areas at 106.307 (38.2 Fibo) followed by 106.882 (50% Fibo).
Everyone waited last week for Friday and the speech by Fed Chair Jerome Powell to see if he drops any hits on further monetary easing. The Feds tone was demure, he made no notion that rates were going to be cut in September or in the near future. Instead he stated that the FOMC will continue to carefully monitor the situation. There are many things that are acting together and posing a risk to the global economy, primarily the US-Sino trade war but let’s not forget Brexit tensions, Hong Kong protests, German economic slowdown and the government collapse in Italy. Federal Reserve Vice Chairman Richard Harris Clarida admitted that the global outlook has worsened but the U.S. economy is in a good place and the consumer is strong.
A fresh wave of Trade War escalation came about the same time as the FEDs speech on Friday when China announced $75B worth of additional tariffs on the US, as a countermeasure to the additional tariffs imposed by Trump in the beginning of August.
As a result, the US Dollar fell and safe haven assets like Gold rallied. But as we all know, lately the market is more unpredictable than ever. While Trump was meeting with world leaders in France at the G7 summit, he stated that Chinese officials contacted the U.S. trade counterparts and wanted to continue with “calm” negotiations. According to Vice Premier Liu He – China is resolutely opposing the escalating conflict. The market was quick to react. GOLD opened with a bullish GAP to the downside and pairs like USDJPY opened with a bearish GAP to the upside.
Lets look at USD JPY:
Fundamentally, this week, Thursday will be an exciting day for USD JPY. US will released their GDP figures along with other reports at 12:30 GMT and Japan will follow with Core CPI, Industrial Production and Retail sales. It’s also worth noting that US President Trump and Japan Prime Minister Abe met this weekend at the G7 summit. Terms of trade were discussed, with agricultural goods, cars and car parts being the main focus. A draft agreement may be signed as early as the end of September, that will keep US import tax at 2.5% on Japanese cars with no additional tariffs, as was threatened earlier by Trump and Japan will in turn, gradually lower tariffs on imported beef from 38.5% to 9%.
Technically, on the 4HTF we see a bearish candle following Mr. Powells speech and the announcement of additional US-Sino tariffs on Friday and then Monday morning opened with rejection of lower prices and bullish momentum following a GAP down. The pair has created a new low of 2019 at 104.446. The price has, since Friday, retraced more than 61.8% to the upside, but Parabolic SAR remains bearish and MACD also indicates that short positions look to be more favorable.
As a result: A move down may be considered after the price break the 23.6% Fibo (105.596) down, which should coincide with the price closing below the 9 EMA. First target down will be at strong area of support around 105.271, following will be the January low and todays new low in the area of 104.656 – 104.447. After that, the pair may revisit 2016 lows in the area of 104.137.
If on the other hand there is news released that is aimed at de-escalating the US-Sino trade war, such as positive trade talks the pair may rise with target areas at 106.307 (38.2 Fibo) followed by 106.882 (50% Fibo).