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USD/JPY Fundamental Daily Forecast – Confused Investors Moving Money into Safe-Haven Yen

James Hyerczyk

The Dollar/Yen is trading slightly lower on Friday after giving back earlier gains. The two-sided price action suggests there is still just enough uncertainty over U.S.-China trade relations ahead of the weekend to encourage some light safe-haven buying of the Japanese Yen.

We could also be looking at some light position-squaring ahead of today’s U.S. economic reports, which are not likely to have an impact on Fed policy, but will reveal something about the strength of the manufacturing sector and consumer confidence.

At 09:58 GMT, the USD/JPY is trading 108.542, down 0.066 or -0.06%.

Risk sentiment has seesawed all week amid mixed signals on whether Washington and Beijing can work out at least a partial deal to end trade-related tensions between the world’s two largest economies.

The Dollar/Yen is set to finish the week lower. Investors, who in recent weeks had grown optimistic about the possibility of a trade deal, were supportive earlier in the week. However, as the week progressed, they moved money into the Japanese Yen as they became unnerved by a hardening of the trade war rhetoric from both economic powerhouses.

Earlier in the week, investors moved money into the safe-have Yen after President Trump said the United States would raise tariffs on Chinese imports if no deal is reached with Beijing to end the trade war.

Money moved back into the dollar on Thursday after a report in the South China Morning Post said the United States could delay tariffs on Chinese imports even if a deal has not been reached by December 15, when tariffs kick in on goods including electronics and Christmas decorations.

Separately, Chinese Vice Premier Liu He, also the chief trade negotiator, said he was “cautiously optimistic” on a phase one deal, according to a report by Bloomberg.

Daily Forecast

This week’s comments are offsetting, which is creating enough investor confusion to drive them into the safe-haven Japanese Yen. Traders should continue to monitor fresh trade talk developments on Friday.

Positive developments will support the USD/JPY. Negative developments will create a “risk-off” scenario, which will make the Japanese Yen the “go to” safe-haven asset.

This article was originally posted on FX Empire