The USD/JPY has recovered to its prior levels after the sudden drop caused by the Chinese set tariffs on the US.
From a fundamental perspective the recovery occurred due to the US President's announcement that he will meet with the Chinese President to discuss trade issues.
During Monday's trading session, the Japanese Yen appreciated 54 pips or 0.50% against the US Dollar. Note, that the US Dollar also depreciated significantly against gold.
The reason for the advance was the announcement from the Chinese government that it would impose tarrifs on $60B of the US goods from June 1.
Most likely, the demand for the Japanese Yen and for gold has increased as for the safe-haven assets.
US Retail Sales will impact USD/JPY
On Wednesday, Aussie traders have to watch out for the Australian Wage Price Index publication at 01:30 GMT. It is the Australian equivalent of the UK Average Earnings Index.
During the same day, at 06:00 GMT and at 09:00 GMT GDP data will be published in the European Union. Namely, at 06:00 GMT watch the German Preliminary GDP release and at 09:00 GMT the flash EU GDP will be out.
These data sets are not the ones that usually cause big moves. However, during the recent months we have seen changes in that. The EU data has resumed to cause moves on the EUR pairs.
Also on Wednesday, the Canadian CPI and US Retail Sales will be published at 12:30 GMT. The CPI caused moves of 23 to 61 pips since December on USD/CAD. Meanwhile, the US retail sales have created moves from 12 to 40 base points on EUR/USD.
Early on Thursday, at 01:30 GMT the official Australian employment change will be published. The data is expected to cause a minor impact. This event is the last notable of the week.
Watch this week's economic calendar analysis and leave comments with questions about the specifics.
USD/JPY short-term daily review
During the previous trading session, the USD/JPY currency pair tumbled to the monthly S3 at the 109.12 mark. During Tuesday's morning, the pair reversed north to the 55– and 100-hour SMAs located circa 109.68.If the given moving averages hold, it is expected, that the exchange rate reverses south and trades down. Important support levels to look out for is the weekly S1 and the monthly S3 located at 109.32 and 109.12 respectively.
However, note, that the rate is also supported by the Fibonacci 50.00% retracement at 109.58. Thus, the pair could breach the given SMAs and rise to the monthly S2 at 109.97.
Hourly Chart
On the daily candle chart, it can be seen that the rate has fallen below all of the daily chart's simple moving averages. It indicates that the currency pair is oversold.Although, it does not necessarily indicate that the rate will correct itself by moving up. During sharp fundamental moves the currency exchange rate ignores the SMAs. Moreover, they are forced to sharply follow the exchange rate.
Daily chart
On Monday, during the drop down, 63% of open position volume was in long positions.
By the middle of Tuesday's London trading, 59% of open position volume on the Swiss Foreign Exchange was in long positions.
These positions were either set up to profit from a retracement or had suffered losses during the decline.
Meanwhile, trader set up pending orders were mostly bullish, as 64% of pending commands in the 100-pip range were set to buy.