USD/JPY: Risk aversion returns ahead of fresh US-China trade talks

  • USD/JPY trades near 110.50 before the European session starts on Tuesday.
  • Latest news signaling fresh US-China trade talks renewed risk aversion.
  • 110.65 continue to limit the pair’s immediate upside with 110.25 acting as adjacent support.

The USD/JPY pair trades little changed around 110.50 during early Tuesday. The pair witnessed pullback since early Asian session as traders rushed to risk safety ahead of fresh US-China trade talks after the US market was closed on Monday. Adding to the sentiment were comments from China’s Vice Premier Han Zheng that signaled the need for tax cuts to relieve pressure on the economy.

The US markets were closed on Monday due to President’s Day holiday and investors were left with few updates on the trade developments as the US delegates return from Beijing on late-Friday. During initial Tuesday, Reuters reported that the White House Press Secretary Sarah Sanders signaled fresh US-Sino meeting on February 19th, led by the US Trade Representative Lighthizer and will be attended by the US Treasury Sec. Mnuchin, Commerce Secretary Ross, White House Economic Adviser Kudlow and White House Trade Adviser Navarro.

The news report also said that the trade talks will focus on "needed structural changes in China that affect trade" as well as China's pledge to purchase "a substantial amount of goods and services from the US".

In another news report from the Reuters, it was mentioned that the Chinese Vice Premier Liu He will be In Washington on February 21st and 22nd to continue the trade negotiations.

The news of internal talks between the White House policymakers is likely to take a toll on on-going Sino-US trade negotiations mainly due to tough demands from the US, which in-turn triggered risk aversion across the board.

Additionally, the Chinese official People’s Daily newspaper reported the latest comments from Vice Premier Han Zheng on Tuesday, as he said that Beijing needs to cut company taxes and fees as an important part of fiscal policy.

Investors may now focus on the trade developments in order to determine trade and risk sentiment as the US traders return to markets after an extended weekend.

USD/JPY Technical Analysis

Failures to surpass 110.65 can drag the USD/JPY pair towards 110.25 and then to 110.00 whereas 109.60 could appear on sellers’ radar afterward.

On the upside, a clearance of 110.65, 111.00 and 111.15 may entertain buyers ahead of pleasing them with a 200-day simple moving average figure of 111.30.

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