USD/JPY goes taut as the US unleashes tariffs on China

Dollar-Yen pairing restrained for now, but tariff ramp-up likely to unleash further market reaction as Friday rolls on.
Market sentiment is holding steady for now ahead of the US NFP report.

Joshua Gibson FXStreet

The USD/JPY is trading into 110.70 as the trade war between the US and China heats up, with the first volley of US tariffs on Chinese goods coming into effect. Markets are currently trading steadily following the tariff deadline, but traders are keeping an eye out for China's reaction.

The trade war between the US and China is set to spiral out of control quickly, with US President Donald Trump stating to reporters aboard Air Force One, "You have another 16 (billion dollars) in two weeks, and then, as you know, we have $200 billion in abeyance and then after the $200 billion, we have $300 billion in abeyance. Ok? So we have 50 plus 200 plus almost 300". The potential for a worsening schism between the world's two largest economies is keeping risk appetite at bay, and the USD/JPY pairing is trading tightly as traders await a direct response from China.

Friday also brings the US Non-Farm Payrolls report at 12:30 GMT, though despite the high-impact report, market reactions are likely to be muted as broader markets react to the trade tariffs.

USD/JPY levels to watch

As noted by FXStreet's own Omkar Godbole, "the probability of a big sell-off is high as indicated by Tuesday’s bearish outside-day candle (bearish pattern). Further, the outlook remains bearish while the pair is trading below 111.40 (high of the bearish outside-week candle created in May). The sell-off would gather pace once the USD bears beat the support of the rising trendline (drawn from March low), currently located at 110.22."

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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