Is USDJPY the Victim of War on Trade?

Boris Schlossberg BKTraders and Prop Traders Edge

Market Drivers January 23, 2018
BOJ Sticks to 2% target but USDJPY falls through 110.50
GE ZEW beats
Nikkei 1.29% Dax 0.49%
Oil $63/bbl
Gold $1337/oz.
Bitcoin $10300

Europe and Asia:
EUR GE ZEW 95.2 vs. 89.8
GBP UK Industrail Trends 14 vs. 13

North America:
No Data

Yen strengthened in early European trade despite a relatively dovish message from the BOJ which maintained its 2% inflation target and did not suggest that it would taper its quantitative easing program in any way.

At the monthly presser, BOJ Governor Kuroda stated that the central bank still sees more downside risks to prices and added that even though the economy was growing prices have yet to follow suit.

He noted that the central bank was focused on wages as without wage growth prices cannot increase. He also stated that this was not yet the time for a policy exit stating that ETF purchases will continue. The comment caused the USDJPY to spike above the 111.00 figure as traders were disappointed with BOJ’s dovish stance, but the pair eventually gave up the gains and drifted all the way below the key 110.50 support as US yields drifted lower.

As we have been stating ad nauseam, the dollar simply does not have a bid in the FX market right now. Despite the budget deal yesterday and relatively dovish slant by BOJ today USDJPY has failed to gain any traction and now seems destined to retest the key support at the 110.00 level.

The FX markets remain skeptical about Fed’s gradual tightening program given the persistent state of turmoil in DC and the prospect of further trade tensions between US and the rest of the world. NAFTA talks begin today and they will be seen not only as a barometer of trade relations in North America but as a harbinger of US trade policy going forward. Yesterday’s tariffs against solar panels and washing machines may have been the first salvo in the Trump administration’s war on trade and the FX market appears to be reflecting the general investor angst over this course of action.

There is no data on the docket today, but if risk aversion flows pick up the 110.00 level in USDJPY will come into view as the day progresses.

Author

Boris Schlossberg

BKTraders and Prop Traders Edge

Boris Schlossberg was key speaker at the FXstreet.com International Traders Conferences 2010. Mr. Boris Schlossberg is a leading foreign exchange expert with more than 20 years of financial market experience.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold holds above $5,000 as bears seem hesitant amid Fed rate cut bets

Gold edges lower at the start of a new week, though it defends the $5,000 psychological mark through the Asian session. The underlying bullish sentiment is seen acting as a headwind for the bullion. However, bets for more rate cuts by the Fed, bolstered by Friday's softer US CPI, keep the US Dollar bulls on the defensive and continue to support the non-yielding yellow metal as the focus now shifts to FOMC Minutes on Wednesday.

Week ahead: Data blitz, Fed Minutes and RBNZ decision in the spotlight

The US jobs report for January, which was delayed slightly, didn’t do the dovish Fed bets any favours, as expectations of a soft print did not materialize, confounding the raft of weak job indicators seen in the prior week.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.