Sellers are still not giving up on the level just yet
Offers, some decent-sized expiries, and the 38.2 retracement level all sit around the figure level and a combination of those is still helping to keep a lid on USD/JPY price action since last Friday. And that comes despite there being positive headlines to start the week from the US-China trade front.
As mentioned before, a trade deal between US and China is likely to be brokered out at the end of the day and hopes of that will continue to give risk sentiment some form of lift for the time being. However, I just don't see how both countries can bridge the gap on more structural issues like IP protection and the currency; there have been no signs of that changing.
With a gap like that still existing, it's more than likely there will still be some trouble down the road but that's something for markets to worry about later. In any case, the more immediate worry is that even a US-China trade deal will not help to solve the ongoing global growth slowdown.
And that's something that markets will start to take notice of soon enough. With PMI figures all over the world slumping, as Eamonn also highlighted here from Asia, a trade truce between US and China is merely putting a plaster to plug the hole in the dam of souring risk sentiment.
USD/JPY may still be getting a temporary boost from trade talks in Q1 this year, but I reckon as we move towards 2H 2019, the more pronounced theme of a global growth slowdown will start to take over markets and that is when the pair may encounter some heavier downside pressure; as what most financial houses are calling for.
For now though, the more positive bias in the pair remains and if price breaks above 112.00, we can look forward to an extension towards 113.17. As for a trading bias, the more price starts to run higher from here, the more inclined I will be to adding to structural short positions based on the above view.
With a US-China trade deal still yet to be announced, I reckon a top for USD/JPY may not yet have been reached. But the closer we are to that announcement, I believe it's also the closer we are to reaching a cap on price action for the pair this year.
