USD/JPY Fundamental Daily Forecast – It’s ‘Risk-On’ with Some Limitations

The USD/JPY is trading higher on Friday on the back of positive developments over a potential trade deal, however, gains are being limited by lingering worries.
James Hyerczyk

The Dollar/Yen is trading higher on Friday, rebounding from yesterday’s steep sell-off that drove the Forex pair into its lowest level since November. Thursday’s sell-off was fueled by diminished risk appetite amid ongoing political turmoil in Hong Kong and weak data from Asia and Europe.

The lack of progress toward a trade deal between the United States and China also weighed on investor demand for risky assets. This was fueled by a report that said the two economic powerhouses had hit a snag in negotiations.

At 10:48 GMT, the USD/JPY was trading 108.691, up 0.274 or 0.25%.

“The U.S. is trying to secure concessions from China to regulate intellectual property protections and to stop the practice of forced technology transfer in exchange for rolling back some of the tariffs,” CNBC’s Kayla Tausche reported, citing people familiar with the matter.

The Wall Street Journal first reported the snag in negotiations, adding China is hesitant to commit to a specific amount of agricultural products in the text of a potential deal.

Daily Forecast

The USD/JPY is trading higher on Friday on the back of positive developments over a potential trade deal, however, gains are being limited by lingering worries.

On Thursday, Chinese Ministry of Commerce spokesman Gao Feng said that both countries are holding deep discussions about a “phase one” deal, but noted that the rolling back of some tariffs is key to reaching an agreement.

“The trade war was begun with adding tariffs, and should be ended by canceling these additional tariffs. This is an important condition for both sides to reach an agreement,” Fend said Thursday at a weekly press conference.

Later on Thursday, White House economic adviser provided another ray of hope when he said negotiations over the first phase of a trade agreement with China were coming down to the final stages, with the two sides in close contact.

Speaking after an event at the Council on Foreign Relations late Thursday in Washington, Kudlow told reporters that a deal was close though “not done yet.”

“We are coming down to the short strokes,” Kudlow said. “We are in communication with them every day right now.”

At 13:30 GMT, the U.S. will release its latest data on Core Retail Sales. It is expected to show a 0.3% increase. Retail Sales are expected to have risen 0.1%.

The Empire State Manufacturing Index is expected to come in at 6.1 and Import Prices are expected to have dropped 0.2%.

At 14:15 GMT, Capacity Utilization is expected to come in at 77.2% and Industrial Production is expected to show a 0.4% loss.

Finally, a report on Business Inventories at 15:00 is expected to show a 0.1% rise.

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