July U.S. employment data nLLA3JEEAT reinforce the narrative that the stellar 4.1 percent Q2 GDP growth rate borrowed from Q3 growth, suggesting less lift for U.S. interest rates and the USD near-term.
With IMM specs heavily net long at entry levels near 2018's highs, there's greater USD/JPY downside positioning risk.
China's move today to stop, or at least slow, the CNY's rot is a temporary drag on USD/JPY amid an escalating trade war.
Q2 U.S. GDP was likely boosted by pre-tariff sales, while Q3 growth could be slowed by implementation.
The big wick on USD/JPY's weekly candlestick would be more bearish if USD/JPY closes below the weekly Tenkan at 111.19.
The trend-defining pivot point is the 55-DMA at 110.66.
Closing below it suggests the weekly Kijun at 108.87 is in danger.
Though Fed's tightening is keeping 2-year Treasury-JGB yield spreads near post-GFC highs, 10-year spreads peaked in May and are 18bp lower now, as T-notes yields hold near the expected Fed funds terminal rate by 3 percent and BOJ curve steepening guidance lifts JGB yields.