- The USD / JPY fails to extend the previous day’s gains beyond 107.50.
- The optimism surrounding the cure for viruses and the new stimulus measures recently challenged by China’s negative trade decision.
- Updating Japanese industrial production, trade / virus will be key before Powell’s testimony.
The USD / JPY fell to 107.30 in the middle of the pre-Tokyo Asian session on Tuesday. While the sense of risk at the start of the week propelled the yen pair to the highest since May 12, China’s latest tariffs on Australia have barely rekindled fears of a trade war and optimists.
Fears of a trade war weigh on the optimism induced by vaccines…
With the announcement that the Chinese Ministry of Commerce has confirmed earlier rumors of 80% tariffs on Australian barley, the sense of market risk diminishes amid fears of another trade war. The latest Dragon Nation decision follows the ban on meat from some Australian processors the previous week. Although Chinese authorities refrain from linking it to the coronavirus (COVID-19), recent negative trade measures appear to be the result of pressure from the Australian Prime Minister to investigate China’s role in the epidemic virus.
Global markets applauded the news of virus healing on Monday, shared by Moderna Inc., while benefiting from indications of further stimulus from the Fed, BOE and Europe. In doing so, traders ignored the Chinese-American brawl that took on an intense mood during the Asian session the day before.
That said, the Wall Street benchmark made big gains while yields and US Treasuries also described the general feeling of risk when they finished trading the day before. While following in the footsteps, the S&P 500 Futures recorded gains of 0.17% to 2,950 at the time of the press.
Although trade / virus updates remain the key, Japan’s April industrial production, which is expected to remain at -5.2% and -3.7% on YoY and MoM, respectively, could offer intermediate indices.
The 50-day EMA, currently near 107.65, continues to act as the main upward barrier for the pair, ahead of the monthly high of 107.77 and the mid-April highs of 108.10 . Rather, sellers are expecting entries below an eight-day uptrend line at 107.10 now.