USD/JPY Price, Analysis and Chart
- USD/JPY continues to drift lower on fractious US-China relationship.
- 50-day moving average providing support for the pair.
USD/JPY Slipping Lower as Risk Taken Off the Table
The already unstable relationship between the world’s two superpowers was put under further pressure Tuesday after the US Senate passed a bill aimed at protecting citizen’s rights in Hong Kong as demonstrations turn increasingly violent. The Hong Kong Human Rights and Democracy Act – a bill that would require Hong Kong’s special economic status to be looked at annually – was passed though the US Senate and now goes to the House of Representatives for approval. The bill drew predictable ire from China, with the country’s foreign minister saying that it seriously violated international law and ‘basic norms governing international relationships’.
In addition to the bill, US President Trump threatened to raise tariffs on Chinese imports further if a trade deal between the countries cannot be found. President Trump told reporters that ‘China is going to have to make a deal that I like. If they don’t, that’s it. If we don’t make a deal with China, I’ll just raise tariffs even higher’.
With tensions between the two countries inflamed further, risk-off assets found a bid with gold, the Swiss Franc and the Japanese Yen all benefitting. The US dollar also picked up a small bid – the cleanest shirt in the dirty laundry basket – but the Yen’s bid prevailed, pushing USD/JPY lower. The daily chart now shows the pair trapped below the 200-day moving average and above the 50-dma, with the range tightening. USD/JPY also nears the 38.2% Fibonacci retracement level at 108.312 and a confirmed break lower would see the pair target the November 1 swing-low at 107.888. Below here the 23.6% Fib level at 106.838 and the October 3 low print at 106.475 come into play.
USD/JPY Daily Price Chart (March – November 20, 2019)
IG Client Sentiment shows that traders are 52% net-longUSD/JPY, a bearish contrarian bias.
However recent daily and weekly positional changes give us a mixed outlook for USD/JPY.