- The Japanese Yen begins the new week with a weaker tone amid optimism for the commercial agreement between the US and China.
- The hard line of the Fed and the decrease in fears to a recession in the US support the USD and support the USD/JPY.
- Betting for an increase in BOJ rates could strengthen JPY before the US and China Joint Declaration about commercial conversations.
The Japanese Yen (JPY) touches a minimum of one month against a US dollar (USD) in general stronger during the Asian session on Monday in reaction to optimism for the commercial agreement between the US and China. The US and China finished high -risk commercial conversations in Switzerland in a positive note on Sunday, which increased the confidence of investors and undermined the demand for traditional safe shelter assets, including the JPY. Apart from this, concerns about Japan’s growth prospects due to uncertainty about US tariffs weigh even more about JPY. The USD, on the other hand, received support from the Hard Line Pause of the Federal Reserve (FED) earlier this month and the decrease in concerns about a recession in the US.
However, operators could refrain from aggressive bets and choose to wait for the US and China Joint Declaration about commercial conversations in Geneva. In addition, the optimistic data on household spending in Japan published on Friday supported the case for a greater normalization of politics by the Bank of Japan (BOJ) and should help limit deeper losses of the JPY. Meanwhile, the prospects for more rates increases by the BOJ mark great divergence compared to the expectations of at least three rates cuts by the Fed. This, in turn, justifies a certain caution before positioning themselves for an extension of the recent recovery of the USD/JPY from the minimum of the year, levels just below the psychological brand of 140.00.
The Japanese Yen Alcistas remain defensive while commercial optimism undermines the demand for traditional safe shelter assets
- The US Treasury Secretary, Scott Besent, and the trade representative, Jamieson Greer, said Sunday that a commercial agreement with China had been reached. In addition, the Vice Primer Minister of China, He Lifeng, said that the high -risk meeting achieved substantial progress and reached an important consensus on issues of interest to both countries.
- Optimism triggers a new ola of global risk of risk at the beginning of a new week, which is evidenced in the strong profits in the stock markets and, in turn, undermines the Japanese and safe refuge. However, none of the parties mentioned an agreement to reduce US tariffs of 145% on Chinese assets and 125% tariffs on China on US goods.
- Therefore, investors could choose to wait for a joint statement from the US and China about commercial conversations in Geneva later today, which could detail the details and the framework of the agreement. The Vice Minister of Commerce of China, Li Chenggang, was summoned by saying that “it does not matter when this statement is published, it will be great news and good news for the world.”
- Meanwhile, positive developments help relieve market concerns that a total commercial war could trigger a recession in the US. In addition, the hard line signal of the Federal Reserve that is not inclined to cut interest rates in the short term helps the US dollar to stand firm near its highest level since April 10, reached on Friday.
- Meanwhile, the robust household spending data in Japan and a fall in real wages during the third consecutive month in March contributed to the fears of broader prices increases and rooted in Japan. This supports the case for more increases in interest rates on the part of the Bank of Japan, although commercial uncertainty forced the Central Bank to adopt a cautious posture.
- In fact, the governor of the Boj, Kazuo Ueda, acknowledged that the timeline for the underlying inflation to reach 2% of the central bank has been delayed. However, the minutes of the Boj monetary policy meeting held on March 18-19 revealed last Thursday that the Central Bank is ready to increase interest rates even more if inflation trends are maintained.
- Investors now expect the publication of US inflation figures later this week, which, together with the appearance of the Fed president, Jerome Powell, on Thursday, will influence the USD price dynamics. Apart from this, the Gross Domestic Product report of Japan’s first quarter on Friday should provide a significant impulse to the USD/JPY torque.
The USD/JPY seems to be prepared to appreciate even more, towards the 61.8% Fibonacci level level near the 146.80-146.85 area
From a technical perspective, the USD/JPY pair now seems to have found acceptance above the 50% fibonacci setback level of the March-April fall. In addition, the oscillators in the daily chart have begun again to gain positive traction and remain in upward territory in the schedules, suggesting that the path of lower resistance for cash prices is upward. Therefore, a certain monitoring force towards the region of 146.80-146.85, which represents the level of 61.8% of Fibonacci, seems to be a different possibility. This is closely followed by the Round Brand of 147.00, which, if exceeded, should prepare the stage for an additional short -term appreciation movement.
On the contrary, the 145.55 area, or the level of 50%, now seems to protect the immediate fall, below which the USD/JPY could accelerate the fall towards the psychological brand of 145.00. The latter coincides with the simple mobile average (SMA) of 200 periods in the 4 -hour graph and should act as a pivotal point. A convincing rupture below could cause some technical sales and drag cash prices towards the following relevant support near the 144.45 region on a route to the round figure of 144.00.
Commercial War between the US and China Faqs
In general terms, “Trade War” is a commercial war, an economic conflict between two or more countries due to the extreme protectionism of one of the parties. It implies the creation of commercial barriers, such as tariffs, which are in counterbarreras, increasing import costs and, therefore, the cost of life.
An economic conflict between the United States (USA) and China began in early 2018, when President Donald Trump established commercial barriers against China, claiming unfair commercial practices and theft of intellectual property by the Asian giant. China took retaliation measures, imposing tariffs on multiple American products, such as cars and soybeans. The tensions climbed until the two countries signed the Phase one trade agreement between the US and China in January 2020. The agreement required structural reforms and other changes in China’s economic and commercial regime and intended to restore stability and confidence between the two nations. Coronavirus pandemia diverted the attention of the conflict. However, it is worth mentioning that President Joe Biden, who took office after Trump, kept the tariffs and even added some additional encumbrances.
Donald Trump’s return to the White House as the 47th US president has unleashed a new wave of tensions between the two countries. During the 2024 election campaign, Trump promised to impose 60% tariff particularly in investment, and directly feeding the inflation of the consumer price index.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
