- The USD / JPY fails to extend Friday’s losses as the US dollar picks up.
- American-Chinese tension is intensifying, Powell of the Fed has tried to appear optimistic.
- Powell’s speech, Japan’s Q1 2020 GDP will provide immediate direction.
The USD / JPY posted slight increases while advancing to 107.20 in the Asian pre-Tokyo session on Monday. In doing so, the pair fails to stretch Friday’s losses as the US dollar wins new auctions in a climate of risk. The Fed Chairman’s weekend comments could also contribute to the greenback’s optimistic performance. However, the upcoming interview with the Fed’s decision maker, as well as the preliminary reading of Japan’s first quarter (Q1) GDP, become the key to the short-term direction.
Read: What you need to know before the markets open: risk-off, heavy funda GBP, cold wars, Powell on TV
The American-Chinese struggle becomes extreme …
Following initial arguments and disagreements regarding the coronavirus epidemic (COVID-19), the United States and China are moving into a more serious phase of the fight. Not only are signals from US President Donald Trump to develop a “super-duper missile”, but the call by Chinese Global Times editor Hu Xijin to develop a nuclear arsenal for the dragon nation also threatens market sentiment .
Meanwhile, US President Trump has reiterated his call that the destruction of COVID-19 could be stopped by China. While the Republican leader said that since the early days of the virus epidemic, the World Health Organization (WHO) has not approved the statement. As a result, the American leader earlier reduced the country’s contribution to the world health organization. Axios recently announced the news, suggesting that the world’s largest economy would maintain its funding decision despite signaling new thinking earlier.
Powell and Company strives to calm merchants …
Despite a US economic slowdown, retail sales being the last, Federal Reserve officials did their best to appease traders while easing the outlook for negative rates. In his last public appearance, Fed President Jerome Powell said the economy would “recover” regularly in the second half of 2020. However, comments like “full confidence may have to wait for the arrival of a vaccine “push markets to remain skeptical.
In the midst of all these catalysts, the S&P 500 Futures marks a slight gain of 0.15%, or 4.13 points, to 2858 at the time of the press.
Traders can now focus on the appearance of the Fed chairman on the American TV show “60 minutes” while also waiting for the first quarter 2020 GDP figures for Japan. While the Fed chairman is less likely to abstain from the latest comments, increased optimism could help the markets overcome the risk of a trade war for the time being.
In contrast, Japan’s GDP in the first quarter is expected to have declined 4.6% year-on-year against -7.1% marked in the fourth quarter of 2019. In addition, the QoQ figure should also remain negative at -1 , 2% versus -1.8% previously. If actual numbers match expectations, Japan will experience the fourth recession since the financial crisis, which could propel the USD / JPY further north.
While the 10-day EMA around 107.10 / 05 offers immediate support for the pair before the monthly low close to 105.99, buyers will be hesitant to enter unless breaking the 50-day EMA, currently close to 107.65