USD/JPY pierces 106.00 and tracks US stocks turning positive

• USD/JPY recovers and tracks US stocks.
• USD/JPY needs to regain the 107 handle.

USD/JPY is moving higher along with US stocks that are in a sharp recovery with the Dow Jones Industrial Average bouncing back from a four-session losing streak while investors shrugged off the looming threat of a global trade war and instead focused on positive economic data. Currently, USD/JPY is trading at 106.07, up 0.33% on the day, having posted a daily high at 106.13 and low at 105.35.

Trump said last week he will impose a 25% tariff on steel imports and a 10% tariff on aluminium which some expected to hurt consumers in the US and potentially spark a Global trade war. Over the weekend, Trump continued to tweet on the subject, threatening to slap a tariff on European autos, should the European Union try to retaliate to the new tariffs.

Trump keeps the trade war risks alive

Over the weekend, Trump tweeted that the U.S. is “on the losing side of almost all trade deals. Our friends and enemies have taken advantage of the U.S. for many years.”

With respect to this week’s BoJ meeting, recent comments from Gov. Kuroda have shifted the focus to the BoJ’s policy normalization plans with timing centered around April 2019. We look to continued near-term outperformance in JPY.

USD/JPY levels

While through the 106 level, the next key target comes as the 107.80/90  ahead of 108.00. On the wide, 110.85 is key ahead of and 111.44/50 as being a double Fibonacci retracement that is lining up with a lower and descending 200-D SMA at 111.30. A break of the 105 handle opens up space on the charts with little support on the way down 100.70/99.00 on the charts.