USD/JPY is erasing its 109.32-104.46 August dive as U.S.-China tensions, Brexit fears and Italy concerns dissipate, but lingering worries make a recovery above the 109.32 August 1 peak problematic without tangible trade war de-escalation.
Trump's trade adviser tried Tuesday to rein in rising expectations for a quick trade deal , as have Mnuchin nW1N21901P and Kudlow .
But the markets are in risk-on mode, largely to correct August's manic move into havens, like the yen.
And even tiny Chinese tariff exemptions that benefit China nL3N2621DV are being seen as fodder for fruitful negotiations this month and next.
If that optimism is borne out, USD/JPY's 109.32 Aug.
1 tariff-day high will be in play.
If not, further, and largely expected, ECB and Fed easing may be seen as too little too late to keep rebounds in U.S. yields, equities and USD/JPY from stumbling, the latter by 109.32, the Aug.
1 high and pivotal 61.8% retracement of the 112.40-104.46 April-August slide.
The net spec IMM shorts established in August will likely have been cleared out by then, removing fuel from the recovery.