The yen, paired with the dollar, continues to gradually become cheaper, reflecting the decline in anti-risk sentiment in the foreign exchange market. Having reached its southern peak at the end of August 104.46, the USD/JPY pair rose by almost 300 points, even despite the uncertain positions of the American currency. The thing is that the yen can go ahead only at the expense of an external fundamental background while ignoring Japanese statistics and comments by officials of the Japanese regulator. As soon as the general demand for safe-haven assets weakens, the yen demonstrates its helplessness, falling in tandem with the dollar completely dependent on American events.
A similar situation occurred this time. Against the backdrop of another escalation of the trade war between the United States and China, as well as other factors of geopolitical tension (Brexit, the political crisis in Italy, the Iran issue and related incidents in the Persian Gulf), the yen was a favorite in the foreign exchange market. But the fundamental picture has changed quite dramatically. At the beginning of this week, many experts spoke about the hopelessness of the Chinese issue, pointing out that Beijing and Washington could not even agree on a date for the meeting - what can we say about resolving more serious disagreements on the essence of the conflict. Nevertheless, on September 1, the parties exchanged "tariff blows," and this fact only strengthened the position of skeptics regarding the futility of resolving this issue.
But contrary to these assumptions, the day before yesterday it became known that the parties agreed to hold the 13th round of Sino-US consultations. True, it will not take place in September, as previously planned, but in early October. But next week, the working groups will begin to hold "detailed discussions" with each other, preparing the necessary conditions for holding a high-level meeting - at least at the level of Vice Premier of the State Council of the PRC Liu He from the Chinese side and US Secretary of the Treasury Stephen Mnuchin from the American side .
In my opinion, this event must be treated in advance with a certain amount of skepticism, given the background of the issue. On the one hand, Trump on the eve of the election campaign, by all means, needs a victory "on the Chinese front", and it is likely that this time he will make certain concessions. On the other hand, Beijing is also waiting for the American elections, which are just over a year away (November 2020). Trump recently once again warned the Chinese not to delay the time until the presidential election, since he could win again, "and then there will be a completely different conversation with China." However, at the moment, the head of the White House is losing to his most likely opponent - Democrat Joe Biden. According to recent polls, the former US vice president is 8% ahead of the current president. In the case of a choice between Trump and Senator Vermont Bernie Sanders, the head of state also loses. If voting took place now, then Trump in this pair would be supported by 44%, while Sanders - approximately 50%. It is worth noting here that in September Biden strengthened his position in the camp of the Democrats, so he is a favorite of the primaries.
Naturally, any mistake by the incumbent president is another point to Biden's victory and the Chinese can not understand this. By the way, according to research, those US states that actually secured Trump a victory three years ago were most economically affected by the trade war - in fact, "thanks" to their chosen one. Will they repeat this mistake next year? In other words, there is a reason to believe Beijing this time will not make significant concessions to Washington; Thereby forcing Trump to either meet the PRC or continue the trade war - to the detriment of his country's economy.
However, the market often lives on today. Therefore, the news of the upcoming negotiations allowed USD/JPY bulls to approach the resistance level of 107.10 (the upper line of the BB indicator on the daily chart). This level will surely be overcome, especially if today's Nonpharma enter the "green zone". In general, the pair has the growth potential around 108.80, which is the upper border of the Kumo cloud on D1. This is a kind of price "ceiling" for the USD/JPY pair, however, the price has not risen above this level because of a local nature since May of this year.
Thus, at the moment, the pair has long positions in priority in the medium term but it is better to open trade orders after the release of data on the US labor market. The dollar may react too sharply to negative trends, in the light of recent comments by some Fed officials who called for a 50-point reduction in interest rates. It should also be noted that Fed Chairman Jerome Powell will speak at 4 hours after the Nonfarm today. It can mitigate possible optimism after the release if it focuses on the consequences of the global trade conflict in the context of further actions of the regulator. In other words, the American session on Friday promises to be boring: the dollar today can either receive substantial support or again fall under a wave of sales. The yen in turn. In turn, the yen is now completely dependent on the greenback – until Beijing and Washington again "beat the pots," which I personally do not doubt for a second.
The material has been provided by InstaForex Company - www.instaforex.com