USD/JPY smothered by the 4-hour 20 MA, risk skewed to downside

• Geopolitics continue to weigh on risk and support the yen.
• All eyes will be on the Chinese CPI to see if another surprise upside can lift spirits.

USD/JPY is hugging the base of the sell-off in a consolidation of the downside, currently trading just a touch below the 106 handle and between a range of 105.71 and 106.07, submerged below a 20-day moving average. 

The markets are directionless for there is no real clarity on the trade-war scenario and asset classes are pushing extremes, almost at breaking point in some respects. The central banks are increasingly dovish, with both the RBA and RBNZ, as well as the ECB preparing for unconventional measures which are keeping yields low across the circuit and risk at bay, supporting the attractiveness of the yen and safe-haven asset classes such as precious metals. 

Meanwhile, we had the Japanese data in earlier ahead of the Tokyo open. the data arrived as follows:

• Japan GDP SA (Q/Q) Q2 P 0.4% (est 0.1%; prev 0.6%).
• **Revisions** Japan GDP SA (QoQ) Q2 P 0.4% (est 0.1%; prevR 0.7%; prev 0.6%).
• Japan GDP Annualized SA (QoQ) Q2 P 1.8% (est 0.5%; prevR 2.8%; prev 2.2%).
• Japan GDP Nominal SA (QoQ) Q2 P 0.4% (est 0.1%; prevR 1.0%; prev 0.8%).
• Japan GDP Deflator (QoQ) Q2 P 0.4% (est 0.3%; prev 0.1%).
• Japan Money Stock – M2 (YoY) Jul 2.4% (est 2.3%; prev 2.3%).
• Japan Money Stock – M3 (YoY) Jul 2.0% (est 2.0%; prev 2.0%).
• Japan GDP Annualized SA (QoQ) Q2 P 1.8% (est 0.5%; prev 2.2%).
• Japan GDP Nominal SA (QoQ) Q2 P 0.4% (est 0.1%; prev 0.8%).

Geopolitics at the core of markets

Overnight, on the geopolitical front, President Trump was saying that he is not thrilled by “our very strong dollar”. Trump was calling for “substantial Fed Cuts” to help US companies compete. Also, in Bloomberg headlines stated that the White House was delaying a decision on enabling US companies to resume business with Huawei, in apparent response to China halting purchases of US agricultural products. The Atlanta Fed's GDP prediction model projected a 1.95% growth rate for Q3, little changed from the 1.94% on 1 August.

Today, we look forward to the Chinese inflation where CPI is seen holding at 2.7% YoY in July. this will follow yesterday surprise rise in Chinese exports that boosted rsk sentiment a touch. 

USD/JPY levels

Valeria Bednarik, the Chief analyst at FXStreet explained that the short-term technical bias remains skewed to the downside, with indicators below their midlines in the 4-hour time frame, with significant support seen at August lows at the 105.45/50 zone:

" A breakdown there could send the pair quickly to 105.00 ahead of January lows at 104.00. On the other hand, immediate resistance stands around 107.10, but USD/JPY would need a break out of the 20-day SMA around 107.65 to ease the immediate selling pressure."