Yen Weakens
USDJPY is on watch this week following a bullish channel break yesterday. The pair has seen strong upside in recent days linked to a shift in global sentiment. A ceasefire between India and Pakistan, ceasefire hopes between Russia and Ukraine, a US/UK trade deal and now a 90-day window of reduced tariffs between the US and China, are combining to help lift risk sentiment. Against this backdrop we’ve seen sharply lower safe-haven demand which has weakened the Yen. At the same time, USD has risen on a perceived lessening of economic risks as a result of rising trade optimism.
US/China Talks – Volatility Risks
For now, the US/China trade talks remain the biggest market story. The agreement for both sides to reduce tariffs for the next 3-months to allow for continued negotiation has been welcomed by traders. If talks progress positively over that timeframe and headlines feed into continued optimism, the current risk rebound is likely to continue, paving the way for a further depreciation in JPY. Meanwhile, USD should stay bid as growth prospects improve. However, if talks falter along the way or break down entirely, this should see a swift reversal of the current move with safe-haven demand soaring and USD coming under fresh pressure. As such, there is plenty of news-flow risk in the near-term outlook.
US Inflation Due
Looking ahead today, US CPI will be main focus for traders. Any fresh upside in CPI data should drive USD higher again especially against a backdrop of a hawkish shift in market pricing for Fed rates. Pricing for a cut has now moved out to September from June previously and could be pushed back further if inflation remains sticky here.
Technical Views
USDJPY
The rally in USDJPY has seen price breaking out above the bear channel from YTD highs. Price is stalled for now into the 148.41 level. However, with momentum studies bullish, focus is on further upside while price holds above the bear channel highs with 151.46 the next target for bulls.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.