Japanese Yen Soars on Rising Threat of a Full-Blown Currency War

JPY Price Analysis and Talking Points:

• Japanese Yen Soars as Chinese Yuan Breaks 7.00 Barrier

• Japanese Yen and Gold to Benefit from a Currency War

See our quarterly JPY forecast to learn what will drive prices throughout Q3!

Japanese Yen Soars as Chinese Yuan Breaks 7.00 Barrier

After President Trumps surprise decision to break the ceasefire and pledge to impose 10% of tariffs on $300bln worth of Chinese goods from September 1st. All eyes were on Beijing response, in which the PBoC had weakened the Chinese Yuan, prompting the currency post its biggest drop since 2015 and fall through the key 7.00 handle (down 11% since the beginning of the trade war). Subsequently, this had sparked safe-haven flows into the JPY as equities tumbled amid rising fears over a currency war. As we await the response from the White House, there is a potential that we are just one tweet away from a full-blown currency war.

Japanese Yen and Gold to Benefit from a Currency War

Those assets that are set to notably benefit from a currency war is the Japanese Yen and Gold. However, with regard to the JPY, there is a risk that Japanese Officials could potentially intervene in order to stem an aggressive bid in the currency. Therefore, gold may well indeed be the preferred option.

USDJPY Technical Outlook

Risks continue to remain titled to the downside for USDJPY with the pair making a break of trendline support from the 2016 low. A close below opens scope for a test of the 23.6% fib at 105.33, before the psychological 105.00 handle.