USD/JPY failed to break through a wall of resistance near 109 for the second time this month, with today's 108.95 top reinforced by trade war angst in the wake of harsh comments by U.S. President Trump. Those comments came after the first of two days of U.S.-China trade talks in Shanghai, which will conclude well before the end of the FOMC's meeting on Wednesday -- and perhaps inform the Fed debate as policymakers contemplate their first rate cut in a decade .
Powell and other Fed speakers have noted global economic weakness tied to contracting global trade, mostly seen as fallout from U.S.-China tensions, as an impetus for easing.
It's doubtful the Fed would be telegraphing a rate cut Wednesday and a good chance of more in the months ahead if they had confidence U.S. and Chinese negotiators could reverse protectionist measures over that period.
The Fed also must guard against yield curve inversion and excess USD strength that negative yields abroad promote.
The BOJ, for their part, passed on easing at today's meeting due to doubts about the net benefit of more deeply negative rates, despite a 3.6% plunge in June factory output nL4N24U1AV and a dispute with South Korea that threatens both economies nL4N24V1FL and tech supply chains.
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