Trump escalates trade war and USDJPY rejects 109.00

August 2, 2019

By Admiral Markets

Source: Economic Events 02 August 2019 – Admiral Markets’ Forex Calendar

After the FED rate decision on Wednesday, the USDJPY took a short try to recapture 109.00.

After FED chairman Jay Powell characterised the 0.25% expected rate cut as a mid-cycle adjustment and signalled that markets shouldn’t expect a series of rate cuts now, markets started to price out three further rate cuts by December.

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As a result, the USDJPY went back above 109.00, but was pushed significantly lower in the afternoon after disappointing ISM Manufacturing data. Trump then gave the currency pair the kiss of death by announcing 10% new tariffs on Chinese goods from September.

The most likely reason for Trump doing this: the FED rate cut can be considered as an anticipation of a global economic downturn. A downturn which could be triggered by a further trade war escalation between the US and China. And after Trump tweeted his disappointment about the FED rate decision on Wednesday, the new tariff announcement is intended to give Trump what he wants to get from FED: rate cuts, cheap money and fuel for further all time highs in US Equities – no matter what.

That said, into the weekly close the region round 106.80 comes into our focus in USDJPY, and a break lower activates the region around the current yearly lows around 105.00, while only sustainably recapturing 109.00 would brighten the technical picture.

Source: Admiral Markets MT5 with MT5SE Add-on USDJPY Daily chart (between 26 April 2018 to 02 August 2019). Accessed: 01 August 2019 at 10:00 PM GMT

Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of USDJPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016 it fell by 2.8%, in 2017 it fell by 3.6%, in 2018 it fell by 2.7%, meaning that after five years, it was up by 4.1%.

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