USD/JPY analysis: trade war tensions benefit the JPY

Valeria Bednarik FXStreet

USD/JPY Current price: 111.27

Escalating trade war fueled demand for the safe-haven yen.
US Treasury yields retreated from weekly highs, adding to JPY strength.

The USD/JPY pair closed the week with modest gains at 111.27, despite edging lower for a third consecutive day on Friday. News that the PBoC adjusted the reserve requirement on FX forwards trading to 20% effective August 6th, alongside with the Chinese government announcing retaliation tariffs on $60B in US goods, fueled demand for the safe-haven yen. Also, US Treasury yields ended the week with a softer tone, with the yield on the benchmark 10-year Treasury note settling at 2.95% after peaking at 3.02% mid-week. Early Friday, the BOJ released the Minutes of its latest meeting, reiterating that monetary policy will remain accommodative until the 2.0% inflation target is achieved. There won't be relevant macroeconomic releases in Japan this Monday. Technically, the pair is bearish, as it resumed its decline after correcting up to the 61.8% retracement of the 113.17/110.58 decline, now struggling with the 23.6% retracement of the same decline at 111.20. In the daily chart, the pair continues developing above its moving averages, but technical indicators resumed their declines with the Momentum near its recent multi-month low and the RSI re-entering negative territory. Shorter term, and according to the 4 hours chart, the technical outlook also favors the downside, as technical indicators are ranging near their weekly lows, although with no certain directional strength, while the pair is well below its 100 SMA and barely holding above the 200 SMA, both flat.

Support levels: 111.00 110.65 110.30

Resistance levels: 111.40 111.75 112.20

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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