FX Action: USD-JPY has recouped back to the 111.0 level
FX Action: USD-JPY has recouped back to the 111.0 level after posting a seven-week low at 110.11 yesterday. The recovery reflects an unwinding in the Yen's safe haven premium after Ankara successfully managed to halt the rout of the Lira, which in turn brought a reprieve in global markets. European stocks are on the up, and most stock markets rallied in Asia, though Chinese markets were an exception following sub-forecast retail sales and investment data. Overall for USD-JPY, analysts still place greater odds for there being a downside breakout that a sustained rally as analysts expect the Sino-U.S. trade war to continue to escalate. There are good reasons to expect the trade confrontation to escalate further. Aside from the new tariffs on $16 B of Chinese imports, and China's measure-for-measure counter, the Trump administration is mulling a tariff hike on $200 B of Chinese imports, which may be confirmed later this month or early next. Trump perceives the advantage in the trade war to be his given the U.S. trade deficit with China, and given the U.S. economy is motoring and given that Trump, such as his proclivities are, will want to look strong before his base going into the midterm elections in November. At the same time, Beijing is not likely to yield, and is looking to be playing the long game, waiting to see how the chips fall for Trump at the November midterms. USD-JPY has support at 110.28-30.