TechnoMeter

Despite persistent media fears about a trade war being the death of the global economy, spot and option trades around USD/JPY are seeing blue (or green) skis ahead. The Yen, typically a barometer of risk sentiment and seen as a bit of a haven asset, continues to weaken and fell to the lowest levels against the USD on Wednesday since early January.
In alignment with a higher spot USDJPY was the US Treasury 2-year yields. The US PPI final figures showed the highest demand since 2011.



FX traders tend to become accustomed to looking at JPY crosses the first time anything seen as negative emerges in the media. Therefore, when news emerged about the initiation of a Trade War as US President Trump began tariffs on China, the initial thought was likely that USD/JPY was going to respond by falling from Trendline resistance.
However, the Japan economy is undoubtedly an export economy. A key part of Abenomics was to encourage inflation through increased business activity that was helped by a weak ¥ though this was not outright stated.

The problem, as outline by Vincent Cignarella of Bloomberg is that the two largest customers of Japan’s goods are the two countries taking the headlines as the key players in the trade war. At the same time, ¥ strength has been absent and likely for good reason.

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