Home Forex News USD/JPY Rallies On U.S-China Trade Deal Uncertainty

USD/JPY Rallies On U.S-China Trade Deal Uncertainty

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  • U.S-China Trade Deal Concerns
  • Economic Data Concerns
  • Japan Economy Contraction

USD/JPY bounce back, from one-month lows, gathered steam on Tuesday as the Japanese Yen remained on the defensive amid economic recovery concerns. The pair edged higher as surging risk sentiments sent traders into the safe-havens.

Yen Weakness

The pair was up by 0.3% Tuesday morning, as it emerged, U.S-China trade deal could be at risk. The pair has remained range-bound in recent weeks, opting to trade in a tight trading range of between 107.53 and 106.8.

While the pair has remained range-bound, things could change in the coming weeks as the risk of a second wave of coronavirus infections continues to influence trader’s sentiments on the Yen and the greenback. Economic releases should continue to influence both the Yen and greenback sentiments in the market.

While Japan’s PMI for June does show some improvement, a reading of below 50 continues to signal the impact, COVID-19 pandemic is having on the struggling economy. The Purchasing Managers Index came in at 37.8, indicating weak operating conditions at Japanese good producers.

The unemployment rate has also edged higher in recent weeks, with Japan’s economy officially in recession after two consecutive quarters of contraction. That said, concerns about the Japanese economy should continue to weigh on the Yen strength seen as one of the reasons why the pair is edging higher.

U.S-China Standoff

The U.S dollar also continues to gain ground against the Yen on concerns that the U.S and China are heading towards a trade deal standstill. Comments by Whitehouse advisor Peter Navarro, which indicated that President Donald Trump has terminated trade deal with China rattled the markets forcing traders to rush to safe havens like the U.S dollar.

While Trump has rubbished Navarro’s comments, uncertainty over the trade deal continues to weigh on the USD/JPY sentiments triggering a spike to one-week highs.

Going forward, traders await the release of U.S Markit Composite PMI flash for June as well as the release of new home sales for May, likely to influence greenback strength conversely USD/JPY price action.

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