USD/JPY pops on the open as Trump and Xi agree a ceasefire (for now)

USD/JPY is currently trading at 108.35 and has jumped from the closing session's level of 107.91 following the news of the trade war ceasefire between Washington and Beijing. USD/JPY made a high here as Trump and Xi agreed in principle to restart trade negotiations and set aside tariff threats. 

"The softer line appears to be in response to US corporate pressure; the headlines will likely be enough to please markets at the opening. However, large stumbling blocks remain. The key issues of intellectual property rights and technology transfer remain."

"Regarding not escalating trade measures, “at least for the time being” was the rider added by Trump in the press conference. Regarding Huawei, there were again no firm promises. Trump said there would be a “meeting” on the subject on 2 July, suggesting a chance for re-assessment. All up, US-China headlines are likely to continue to be a driver of market sentiment for the foreseeable future," analysts at ANZ Bank explained at the open today."

Eyes on Federal Reserve and Nonfarm Payrolls

Looking ahead, the Federal Reserve this month will be a key driver, but not before this week's Nonfarm Payrolls. The Fed has but an emphasis on not only trade but also data and a rate cut in the months ahead are not a done deal. However, July is fully priced in so any huge upside surprises from here on in data could be a catalyst for a correction higher in the greenback as well. 

"We look for payrolls to bounce to 150k in June, following the below-expectations 75k May print. Employment in the goods sector should remain soft, while we look for a modest rebound in the services sector. The household survey should show the unemployment rate remained steady at 3.6%, while wages are expected to rise 0.3% (3.2% y/y) on the back of a favorable reference week," analysts at TD Securities explained. 

USD/JPY levels

While the upsie has come back into view, analysts at Commerzbank noted that USD/JPY’s correction higher has so far been thwarted by the 20-day ma at 108.05, and the market stays immediately offered below the near term downtrend at 108.23. "We note that the Elliott wave count is implying a deeper retracement into the 108.65/109.25 band ahead of failure and for now will stay sidelined. We continue to look for losses to the 78.6% retracement at 105.87."