EUR/JPY dips in Asia despite partial US-China trade deal
- EUR/JPY is reporting marginal losses, having faced rejection at a key hurdle on Friday.
- President Trump's latest trade agreement lacks a durable dispute settlement mechanism and could fall apart.
EUR/JPY is flashing red at press time, despite the US-China trade truce.
The currency pair is currently trading at 119.35, representing marginal losses on the day, having faced rejection at the resistance of Sept. 13's high of 120.01 on Friday.
The key resistance came into play on Friday after President Trump announced a “substantial phase one" of a trade deal.
As per the reports released over the weekend, the US has delayed a planned increase of 25 to 30% in taxes on $250 billion in Chinese goods, while China has to buy $40 to $50 billion in US agricultural products.
Even so, optimism has faded in Asia. At press time, the futures on the S&P 500 are flatlined and the anti-risk Japanese Yen is mildly bid.
The drop in demand for riskier assets could be due to Chinese State Media's reluctance to indicate that any trade deal with the US has been made. Also, the markets are worried that President Trump’s partial trade deal with China is an “uncertain” arrangement at best and could fall apart, paving the way for another round of tariff increase.
Goldman Sachs sees a 60% chance that the announced 15% tariff hike will take effect, but expects a delay until early 2020 as opposed to the current deadline of Dec. 15, according to CNBC.
Therefore, the EUR/JPY pair may remain under pressure during the day ahead. The bid tone around the Japanese Yen may further strengthen if China's trade data, due on Monday, prints below estimates, bolstering fears of a deeper economic slowdown in the world's second-largest economy.
Technical levels