USD/JPY is up today on hope the U.S.-China trade war might become less frightening to financial markets , but China's commerce ministry has highlighted the need for new trade tariffs, the first of which are set for Sept.
1 nL3N25P29K, to be canceled.
Prior tariff escalation came after similar calls from both sides not to proceed with tariff retaliation.
So if the U.S. raises tariffs this Sunday, China will likely follow through with its planned tariff hike that day, endangering the current risk-on rebound in USD/JPY and other risk-sensitive assets.
Decisions to delay tariffs by both sides would send USD/JPY sharply higher.
Adding to the pivotal nature of next week are global PMIs, ISMs and the US employment report for August.
These will provide strong macro baselines for the Sept.
12 ECB, Sept.
18 Fed and Sept.
19 BOJ decisions.
1 tariffs were at least delayed, USD/JPY could clear the cluster of resistance below 107, assuming next week's economic data don't suggest central banks are already too far behind the easing curve, regardless of lessening trade war risk.
Solid data, particularly in the U.S., would boost Treasury-JGB yield spreads and the USD/JPY recovery toward the major 109.32/37 tech targets.