Dollar/yen plunged close to 2.0% last week, as the yen enjoyed its best week since mid-February. Investors will be keeping an eye on the BoJ summary of opinions and Preliminary GDP for Q2, with a weak gain of 0.1% predicted.

USD/JPY fundamental movers

Late in the week U.S. President Trump announced new tariffs on Chinese products, shaking financial markets and sending the safe-haven yen sharply higher. With trade negotiations between the U.S. and China at a standstill, the U.S. announced new tariffs of 10% on an additional $300 billion worth of Chinese goods. The move is scheduled to take effect on September 1, and China has vowed to retaliate.

The Federal Reserve pressed the rate trigger last week, as the Fed lowered rates for the first time in 10 years. The key question facing investors is whether the move is a “one and done” or is there more easing to come? Clearly, Fed Chair Jerome Powell clearly didn’t want to tip his hat too much in his press conference, but his comment that the cut was a “mid-cycle adjustment to policy” seemed to hint against further easing in the near future. This perception sent the U.S. dollar higher, while stocks headed south. Elsewhere, U.S. employment numbers were a mix. Wage growth improved 0.3%, above the forecast of 0.2%. However, nonfarm payrolls slipped to 164,000, down sharply from 224,000 a month earlier.

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

We start with resistance at 110.40 (mentioned last week).

109.73 has held in resistance since the end of May. 109.35 is close by.

108.70 follows.

108.10 was a swing low in late May.

107.50 has some breathing room following strong losses by USD/JPY last week.

The pair broke through support at 106.61 late in the week. It is a weak line.

105.55 has held in support since early January.

104.65 is next.

The round number of 104 was a key line in May 2008.

102.50 is the final support line for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am bearish on USD/JPY

An escalation in tensions between the U.S .and China sent the yen sharply higher, as nervous investors snapped up safe-haven assets. If the trade war between the two super-economies worsens, the yen’s rally could continue.