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Yen Gets Boost from Tariff Talk as Risk Appetite Drops Ahead of NFP

Yen Gets Boost from Tariff Talk as Risk Appetite Drops Ahead of NFP

Tyler Yell, CMT, Currency Strategist
What's on this page

USD/JPY Rate Forecast Talking Points:

  • The ONE Thing: JPY strength may continue to take US Dollar lower as tariff talk heats up. Adding to the troubling tariff news for an export-dependent economy like Japan, Thursday saw an initial industrial output miss adding to the trend of economic data point disappointments since October.
  • Insight from the options market shows investors are paying a premium to protect against further USD/JPY downside relative to the upside.
  • USD/JPY Price Forecast:Continuing in a bearish short-term trend with a focus on the 55-DMA at 108.15 and at 61.8% of the recent two-month advance at 107.21. Resistance is found at the 21-DMA at 109.69.
  • Not familiar with trade wars and their history? We've got you covered

Rising trade tensions are weighing on risk appetite and as a consequence is lifting the Yen. The rise of the Japanese Yen has played out in a similar fashion as the VIX showing that risk aversion is indeed driving the USD/JPY cross lower.

Short-term resistance can be found at the 21-DMA at the 109.69, and any positive surprise on Friday’s Non-Farm Payroll could lead to the test of that level. Data from the US on Thursday like consumer spending was supporting of an economy with higher consumer confidence that comes from an increasingly healthy employment market. At the same time, Japan’s industrial data on Thursday missed expectations alongside news that Japan is concerned about global trade after the US’ latest round of auto tariffs.

See what we see when looking at the Japanese Yen. Check out our new Q2 Yen Forecast here.

USDJPY Chart: Bearish Focus Sees The Price Closing In On Fibo Target

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Chart Source: IG UK Price Feed. Created by Tyler Yell, CMT

Technically Speaking on USD/JPY:

Resistance: 109.69 – 21-DMA

Spot: 108.44

Support: 108.15-107.22 (55-DMA & 61.8% retracement of March-May range)

Almost on cue after Jeremy Wagner, CEWA-M gave traders a heads up, JPY began to strengthen. USD/JPY now looks to be moving lower toward support at the 55-DMA & 61.8% retracement of the February to April range at 107.22.

Traders who utilize Ichimoku on a short-term hourly chart will also see that USD/JPY has held a bearish bias from a trend and momentum perspective since May 21 when the move lower started.

New to Ichimoku? Click here for a free guide if you’d like to learn more

More For Your Trading:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q2 have a section for each major currency, and we also offer an excess of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our popular and free IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a surplus of helpful trading tools, indicators, and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions.

Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities, and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

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