USD/JPY has been trading with the overall downtrend in a non-volatile and impulsive manner. The pair is trading firmly below 109.70 with a daily close. JPY managed to sustain the momentum over USD on the back of the unsettlee trade conflict between the US and China and disappointing economic reports from the US.
The US is due to present Retail Sales report on Wednesday which is expected to drop sharply to 0.2% from the previous value of 1.6%. Amid such bearish expectations, USD is struggling to gain momentum over JPY. The US economy has confirmed waning momentum by a series of downbeat economic reports. Besides, the US economy will deficitely suffer from the tensions. Investors are scared by the dismal prospect that the United States and China are spiraling into a fiercer, more protracted dispute that could derail the global economy. So, investors' fears triggered a sharp selloff on equities markets last week. According to FED Official Kashkari, the worst-case scenario and ever-increasing tariffs for an extended period of time that could make a real effect on US GDP growth that change things.
Additionally, a drop in the consumer outlook for inflation and intensifying trade tensions drew caution from Federal Reserve officials on Monday as policymakers faced fresh market volatility and a renewed set of risks. Major US equity markets were down between 2% and 3.5% on Monday, while bond investors sharply increased their bets that the Fed would be forced to cut rates this year. A closely watched spread between long- and short-term bonds turned negative, seen by some officials as a sign of feeble market confidence in the economic outlook.
Today US NFIB Small Business Index report is going to be published which is expected to increase to 102.3 from the previous figure of 101.8 and Import Prices is expected to edge up to 0.7% from the previous value of 0.6%. Moreover, FOMC Members George and Williams are going to speak today that will hardly make a neutral impact on upcoming USD gains.
On the JPY side, recently BOJ Governor Kuroda stated that additional easing is coming up if the consumer prices lose momentum. Kuroda also assured markets that short-term and long-term interest rates are expected to be kept unchanged at record low till Spring 2020. Today Bank Lending report was published with an increase to 2.4% which was expected to be unchanged at 2.3% and Current Account decreased significantly to 1.27T from the previous figure of 1.90T which was expected to be at 1.71T. The Japanese Economy Watchers Sentiment grew to 45.3 from the previous figure of 44.8 which failed to meet the expectation of 45.9.
To sum up, JPY is holding the upper hand in the pair. It is expected to struggle along the way against USD for a certain period. Upcoming macroeconomic reports from the US are going to reveal negative readings. In this context, USD gains are going to be short-lived and JPY momentum may strengthen again in the process.
Now let us look at the technical view. The price is currently trading at near 109.70 resistance area. The price is expected to climb a bit higher towards 110.50 before any bearish momentum emerges to continue the bearish trend in the coming days. As the price remains below 110.50 area with a daily close, the bearish bias is expected to continue.
