USD/JPY at two-week high as US, China reach deal

The USD/JPY is picking up, following positive US-China trade developments.

On Monday 16 December, the major opened at ¥109.336, 0.05% higher than last week’s closing price of ¥109.281.

A day earlier on December 15, China had agreed to suspend planned retaliatory tariffs on certain US agricultural goods and automobiles, as part of its upholding of the phase one trade deal.

This is the highest level in two weeks, after a five-month high of ¥109.611 recorded last month.

The price is set to rise further, according to IG Chief Market Analyst Chris Beauchamp. He wrote that price level is back in the ¥109.55 region that has marked resistance for months, but it looks like further gains toward ¥110.35 can be expected.

Don’t throw caution into the wind, just yet

Despite this turning point, ANZ Bank analysts warned in a Monday morning note that the phase one deal does not completely rule out the possibility of unresolved trade issues resurfacing in the coming year.

They wrote: ‘The US has agreed to halve the tariffs on US$120 billion of Chinese goods (from 15% to 7.5%) but will retain a 25% on US$250 billion of Chinese imports. There have been no indications from the US that there will be a further roll back in tariffs in the future but the 15 December tariffs would not take effect.

‘In exchange, China has agreed to purchase an additional US$16 billion in goods from the US over the next two years, something already agreed in previous trade discussions.’

Meanwhile, Commonwealth Securities senior economist Ryan Felsman noted there were certainly ‘expectations perhaps that the roll back would be more significant than just 50%’, adding that most investors are still awaiting further details.

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