- China slaps retaliatory tariffs on $75 billion of US goods.
- The JPY gets a strong boost amid the global flight to safety.
- The downside remains limited ahead of Powell’s speech.
The USD/JPY pair reversed an uptick to fresh weekly tops and quickly retreated around 30-pips in the last hour, dropping to the lower end of its daily trading range.
The latest leg of a sudden drop from an intraday high level of 106.77 came after China announced to levy retaliatory tariffs on another $75 billion worth of US goods, which further fueled fears of a full-blown US-China trade war and provided a strong boost to the Japanese Yen's safe-haven status.
A modest USD pullback adds to selling bias
The pair quickly retreated back below mid-106.00s and was further pressurized by a modest intraday US Dollar pullback, triggered by St Louis Fed President James Bullard's dovish comments. Speaking to CNBC this Friday, Bullard said that there will be a robust debate about 50 bps cut at next meeting.
Despite the intraday pullback, the downtick remained limited, at least for the time being, as investors now seemed reluctant to place any aggressive bets rather prefer to wait on the sidelines ahead of the Fed Chair Jerome Powell's scheduled speech at Jackson Hole Symposium later at 14:00 GMT.
Given that another 25 bps rate cut in the September meeting is nearly priced in the market, Powell's comments will be closely scrutinized to find out if the central bank is prepared to slash rates further, which will influence the near-term USD price dynamics and help determine the next leg of a directional move.
Technical levels to watch
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