USD/JPY retreats from intraday high of 155.86 after U.S. President Donald Trump pushed ahead with his protectionist policies, imposing tariffs on Canada, Mexico and China. Initially, the dollar gained, but as concerns receded, the pair fell 0.44% below the open to trade at 154.51.
Global equities traded in a downtrend as market participants seemed concerned. US President Trump imposed 25% tariffs on Canada and Mexico and 10% on China. The US-North American partners vowed to take retaliatory measures, while the latter will challenge the policy at the World Trade Organization (WTO).
At the time of writing, the ISM Manufacturing PMI for January rose to 50.9, beating expectations of 49.8. This was up from 49.2 in December, indicating an improvement in business activity. Digging deeper into the data, the subcomponent of prices paid rose to 54.9 from 52.5, while the employment index rose to 50.3 from 45.4 in December.
Meanwhile, during the Asian session, the Bank of Japan released a summary of its opinions from its January meeting. Some members added that inflation expectations are rising as prices rise above the 2% inflation target, while others said rate hikes would be neutral enough. Policymakers said Japan's economy is resilient and can cope with the protectionist policies implemented by Trump.
This week, the US economic calendar will include a Fed speaker, JOLTS job openings data and factory orders on February 4. In Japan, the schedule is lighter, including the final release of the Jibun Bank Services PMI for January.
USD/JPY is forming a "bearish candle" with a long upper shadow, indicating that the pair has not found acceptance in the 154.78-155.88 range. This is bearish, and judging by the price action, the pair is extending its downtrend within the Ichimoku Cloud (Kumo). Sellers are eyeing the next support level, Senkou Span B at 153.76.
In case of further weakness, the next support will be the 200-day simple moving average (SMA) at 152.83.
On the other hand, if buyers achieve a daily close above 155.00, further gains are expected. The key resistance is at Senkou Span A at 155.76.
