USD/JPY on the back foot on trade-war angst, bears eye break of trendline support

• USD/JPY bears in control on trade war angst as price slips below 4-HR 200 MA.
• Downside technical risks below trendline support are to the 61.8% Fibo target down in the 106.30s. 

USD/JPY is on the back foot in a risk-off climate following the news that the US Senate unanimously approved a bill to place trade pressure on Hong Kong in support of democracy protesters and the Chinese officials responded angrily. In recent trade, there are headlines that Trump will support the bill and sign it, putting it into law – this was reported by both Bloomberg and Reuters. 

Phase One' US-China trade deal may not be completed this year – Reuters 

Overnight, USD/JPY had been on the front foot initially towards 108.80 before sliding to 108.39 on an initial Reuters trade story which suggested the risks that a phase one deal would no be done this year which has thrown prospects of a phase-2 deal way over the horizon. 

• White House Deputy Press Sec, Deere: “Negotiations are continuing and progress is being made on the text of the phase-one agreement” - Fox

• Trump expected to sign Hong Kong bill into law, various trade headlines weighs on risk sentiment

Key notes from the FOMC minutes

Elsewhere, the Federal Open Market Committee's minutes of the 29-30 October meeting, where it cut by 25bp to 1.50-1.75%, underscored the already well-telegraphed mood at the central bank, confirming that most members saw an ensuing on-hold stance as appropriate.

• Most judged level now appropriate barring a 'material' reassessment of the outlook.'
• A couple' said Fed should reinforce statement with communications that another rate cut unlikely without signs of a 'significant slowdown'.
• Many said rate cut warranted due to global weakness and trade uncertainty.
• Some favored keeping rates steady and argued outlook was favorable and inflation expected to rise.
• A couple supported rate cut but said it was a close call.
• Several concerned some banks had reduced capital buffers when the should be rising.
• Discussed that risks to the economic outlook remained tilted to the downside.

Subsequently, US 2-year treasury yields were testing yesterday's afternoon’s low at 1.56% while the 10-year yields were probing 1.73%. "Markets are pricing only a 5% chance of easing at the December meeting but a terminal rate of 1.18% (vs 1.63% currently)," analysts at Westpac noted. 

USD/JPY levels

With the price now below the 4-hour 200 moving average, Bears are testing trendline support on the hourly chart, (confluence of the 23.6% Fibonacci retracement of the late Aug swing lows to Nov swing highs), which brings in the lows of the session ahead of the 14th Nov lows of 108.24. The 1st Nov low is located at 107.88 as a ken target. A break there opens risk to a 61.8% Fibonacci retracement of the sale range down in the 106.30s.