USD/JPY at the mercy of the US-Chinese trade dispute

By Admiral Markets

Source: Economic Events October 11, 2019 – Admiral Markets’ Forex Calendar

With the US Trade Talks to finish today, we want to take a look at the USD/JPY.

After tensions in the trade dispute between the US and China heated up again in the first half of this week, after news broke that the White House continues to consider capital control like limiting Chinese stocks in the US Government Fund or similar, the USD/JPY attacked the region around 106.80/107.00, but didn’t break lower, but instead stabilised over the last days.

Nevertheless, when looking at the daily chart, we feel vindicated in an overall bearish outlook for the currency pair, at least as long as the USDJPY trades below 108.50/109.00.

And even if we get to hear any positive signs of at least a partial trade deal with the US and China negotiating topics like intellectual property or Government subsidies in the upcoming months respectively in 2020, a rather sooner than later attempt to break below 106.80/107.00 in the days to come remains a serious option.

A big driver here could be from the comments made by Fed chairman last Tuesday at a speech in Denver, where Powell said that the FED will resume Asset Purchases to prevent a cash crunch and bringing QE4 officially on the table (even though (surprisingly) emphasizing that it is not a QE).

With that in mind, we consider another attempt to break back below 106.80/107.00 with a significant higher probability than USDJPY trying to break back above 108.50/109.00.

This is still and especially true if any signs of risk aversion start to materialise where a next wave of selling could result in USDJPY being pushed below 105.80 and trigger further selling, quickly activating the region around 105.00 again:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between August 24, 2018, to October 10, 2019). Accessed: October 10, 2019, at 10:00pm GMTPlease note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the USD/JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.

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