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US Tariff, Trade War Fears Resume. USD/JPY Climbs, Eyes July Highs

US Tariff, Trade War Fears Resume. USD/JPY Climbs, Eyes July Highs

Daniel Dubrovsky, Contributing Senior Strategist
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Asia Pacific Market Open – Trade Wars, US tariffs, US Dollar, USD/JPY, Nikkei 225, ASX 200

  • US Dollar soared Friday on retail sales revision and as market mood suddenly soured
  • President Donald Trump rekindled trade war fears, which pared gains in the S&P 500
  • USD/JPY climbs out of consolidation leaving it facing the July highs as its next target

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Following the US Dollar’s longest daily losing streak since August 29th, DXY clocked in its best performance in over three weeks. Its appreciation picked up pace as US retail sales data were revised were revised which somewhat offset the miss in expectations. US government bond yields rallied in the aftermath, signaling firming Fed rate hike expectations.

What really caused the US Dollar to soar against its major counterparts was a sudden reversal in market mood towards the end of the session. US President Donald Trump announced that he still wanted to pursue $200b in Chinese tariffs despite efforts from Treasury Secretary Steven Mnuchin to restart talks with Beijing. This boosted demand for haven assets such as the highly liquid greenback.

The S&P 500 and the MSCI Emerging Markets ETF pared some of their gains as risk trends soured. The pro-risk Australian Dollar declined while the similarly behaving New Zealand Dollar held on to gains. This may have been due to stronger New Zealand manufacturing PMI lowering RBNZ rate cut bets. Meanwhile the anti-risk Japanese Yen headed cautiously higher.

With that in mind, a rather quiet economic data offering at the beginning of this week opens the door for sentiment to be the key driver for markets. This leaves Asia Pacific shares vulnerable to losses as US tariff threats increase trade war worries. As a result, declines in the Nikkei 225 may send the Japanese Yen higher while losses in the ASX 200 weaken the Australian Dollar.

Such an outcome could leave AUD/USD closer to resuming its dominant downtrend seen over the majority of this year so far. Getting under the December/May 2016 lows would open the door to eventually testing 0.6827.

USD/JPY Technical Analysis – Consolidation Ending?

Japanese Yen prices have not only weakened again versus the US Dollar, but USD/JPY has now closed above the 23.6% Fibonacci extension at 111.80. This could leave the pair open to testing the July 19th high at 113.17 after weeks of consolidation. But getting there involves clearing the August 1st high at 112.15.

USD/JPY Daily Chart

USD/JPY Daily Chart

Chart created in TradingView

US Trading Session

US Trading Session

Asia Pacific Trading Session

Asia Pacific Trading Session

** All times listed in GMT. See the full economic calendar here

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--- Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.