The durability of attempts by the U.S. and China to calm trade tensions , after Friday's flare-up, will decide whether USD/JPY breaks below 104.
USD/JPY has found good support in the area, with today's 104.46 low reinforcing major troughs established at 104.10 and 104.56 since March 2018. Both sides made conciliatory statements following Friday's tariffs and Trump's call for U.S. companies to exit China nL3N25M235.
Hopes that calmer heads will prevail, and perhaps political expediency and greater attention to increasing economic and financial market fallout, are reversing the mad dash for safe havens such as the yen and Treasuries.
But USD/JPY will struggle to rise above Friday's 106.73 high and the 50% Fibo at 106.89 of August's 109.32-104.46 drop on trade tensions and the CNY fall without substantive progress toward a U.S.-China trade deal. U.S. progress with Japan and France on trade issues at the G7 may hint at greater cooperation on trade generally.
That nascent trend may have been bolstered by Jackson Hole attendees highlighting the limitations of monetary policy as an offset to trade wars.