USD/JPY fell back to 55-DMA support by 108.50 today due to heightened global trade and growth concerns following abbreviated and adversarial U.S.-China trade talks in Shanghai that reinforce the view that the two largest economies in the world might remain at loggerheads for the foreseeable future.
That prospect is a drag on already slowing global growth that Chairman Powell says the Fed must remain ahead of by easing policy sooner rather than later.
A 25bp rate cut and likely early end to the Fed's balance sheet rundown is expected this afternoon.
What's not yet priced into the rates and risk-sensitive USD/JPY is the Fed's forward guidance compared to the two additional 25bp rate cuts now priced in by January.
Thoday's 156k July ADP and Chicago PMI dive to 44.4, lowest since 2015, will not change the FOMC view, even if soaring consumer confidence modestly propped up U.S. yields and the USD.
The Fed's main fear is they are the only major central bank with enough policy space to deflect a trade-led global slowdown and further USD gains if they don't begin easing and dangle the prospect of more to come.