Yen Sank Despite US-China Hong Kong Tensions, USD/JPY May Fall

Japanese Yen, USD/JPY, US-China Tensions – Asia Pacific Market Open

The anti-risk Japanese Yen and similarly-behaving US Dollar were some of the worst-performing major currencies on Tuesday. Meanwhile the sentiment-linked Australian and New Zealand Dollars appreciated as the Dow Jones and S&P 500 closed +2.17% and +1.23% respectively. Anti-fiat gold prices declined as longer-term Treasury yields, such as the 10-year, rallied.

JPY Forecast

JPY Forecast

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What is the road ahead for the Japanese Yen?

Keep in mind that the Memorial Day holiday meant Wall Street was offline Monday. Most of the gains in equities occurred over the weekend, resulting in upside gaps today. Investors may have welcomed a further easing in Covid-19 lockdowns from across the world, ranging from Japan to California in the United States. This is a global coronavirus case growth continued to slow.

However, equities on Wall Street spent most of their time today on the retreat, attempting to fill the gap. Later in the session, sentiment was further thrown off as reports crossed the wires that the US is mulling sanctions on Chinese officials and firms. This is in response to China attempting to impose more stringent control over Hong Kong. Escalating tensions between the world’s largest economies may have rekindled trade war woes.

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Wednesday’s Asia Pacific Trading Session

A lack of prominent economic event risk during Wednesday’s Asia Pacific trading session likely places the focus for foreign exchange markets on sentiment. The late-day decline in stocks during the preceding North American session may paint a mixed session to come. My Wall Street index did break above a major resistance barrier recently and down the road, that could spell a ‘risk-on’ tilt to follow given confirmation.

Japanese Yen Technical Analysis

USD/JPY could be at risk to a turn lower after as the pair aims to potentially confirm a breakout under near-term rising support from early May – red lines below. Prices seem to be facing the 107.33 inflection point established towards the middle of this month. Taking out this price could open the door to revisiting the 106.71 – 106.83 support barrier. Negative RSI divergence is also showing fading upside momentum which can at times precede a turn lower.

USD/JPY
BULLISH

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of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -14% 1% -7%
Weekly -4% 6% 0%

USD/JPY – Daily Chart

Yen Sank Despite US-China Hong Kong Tensions, USD/JPY May Fall

Chart Created in TradingView

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter