The US administration seems to be considering to increase planned tariffs from 10% to 25%, for $200 B worth of Chinese imports. The move adds further pressure to China as it would face increased tariffs on about half of its exports in the US. While China has not responded initially, reports state that representatives of the US and China have been speaking privately to restart negotiations. Analysts currently, consider the move as another negotiating tactic on behalf of the US. Should there be further escalation of the US-Sino trade dispute we could see the USD strengthening in the short term while commodity currencies may be hit.
USD/JPY rose yesterday breaking the 111.30 resistance line aiming for the 112.05 resistance line. In regards to yesterday’s analysis the pair has broken the 111.30 resistance line and we lift our sideways bias in favor of a more bullish outlook. Hence, we could see the pair trading in a more bullish market today if the FOMC meeting favors the USD side. Please note that the RSI indicator has almost reached the reading of 70, implying a bullish momentum however with room for further advancements available. Should the pair find fresh buying orders along its path, we could see it breaking the 112.05 resistance line while aiming if not breaking the 112.50 resistance barrier. Should it come under selling interest we could see the pair dropping and breaking the 111.30 support line.
JPY weakened as the BoJ pledged to keep interest rates very low, currently remaining on hold at -0.10%. The bank also intends to maintain a long term yield target around zero and to make its policy framework more flexible, reflecting the forecast that it would take time for inflation to reach its 2% target. However, the bank also added that long term interest rates may fluctuate depending on economic and price developments. USD/JPY rose on the news, reflecting the weakening of the JPY which could continue to set the mood for the near term.
USD/JPY rose and tested the 111.30 resistance line during today’s Asian session, however corrected somewhat quite quickly. We could see the pair having some bullish tendencies today as the financial releases could favor the USD side. It should be noted though that to remove our sideways bias, we would require a clear breaking of the 111.30 resistance line. Should the bulls take over the market we could see the pair breaking the 111.30 resistance line and aim for the 112.05 resistance level. Should the bears take over the market we could see the pair aiming if not breaking the 110.75 support line.
BoJ will announce its interest rate decision during tomorrow’s Asian morning and is widely expected to remain on hold at -0.10%. Currently JPY OIS imply a probability for the bank to remain on hold of 98.37%. A lot of ink has been spilled on whether there is going to be a more hawkish tweak regarding the bank’s QQE program in the accompanying statement, however recent financial releases seem to disagree with such a scenario. Also, analysts mention the possibility for the bank to lower its expectations regarding inflation as it currently seems to be drifting further away from the bank’s target. Should there be a neutral to dovish comment, we could see the JPY weakening.
USD/JPY continued its sideways movement on Friday and today’s Asian morning between the 110.75 support line and the 111.30 resistance line. The pair could continue to have a sideways movement however some bearish tendencies could follow, should headlines about a hawkish tweak in BoJ’s accompanying statement affect the market. Should the pair come under selling interest we could see the pair breaking the 110.75 support line while should it find extensive buying orders along its path we could see it breaking the 111.30 resistance line.