Japanese Yen Talking Points
USD/JPY dips to a fresh monthly-low (110.11) as the latest adjustment in U.S. trade policy fuels the risk for a global trade war[1], and recent price action keeps the near-term outlook tilted to the downside as the exchange rate continues to carve a series of lower highs & lows.
Bearish USD/JPY Sequence Keeps Downside Targets on Radar
The Japanese Yen[2] appears to be benefitting from the risk adverse environment as growing tensions between the United States and Turkey[3] dampen the outlook for global growth, and the threat for contagion may keep USD/JPY under pressure as it undermines the Fed’s scope to implement higher borrowing-costs over the coming months.
Even though the Federal Open Market Committee (FOMC) appears to be on track to deliver four rate-hikes in 2018, the uncertainty surrounding U.S. trade policy seems to be rattling market expectations as Fed Fund Futures now reflect easing bets for a 25bp rate-hike in December.
As a result, USD/JPY stands at risk of exhibiting a more bearish behavior ahead of the next FOMC[4] meeting on September 26, and lackluster data prints coming out of the U.S. economy is likely to keep dollar-yen[5] under pressure as updates to the Retail Sales report is anticipated to show household spending increasing 0.1% in July versus the 0.5% expansion the month prior.
Keep in mind, there appears to be a broader shift in USD/JPY behavior as both price and the Relative Strength Index (RSI) snap the upward trends from earlier this year, with the dollar-yen exchange rate at risk for a larger correction as it appears to be coming off of channel resistance.
