In mid-May, the yen actively lost its positions, reaching an annual minimum (111.40) paired with the dollar. The main driver for the growth of the pair USD / JPY was China, which allegedly went to meet Washington on the issue of trade relations. The US Secretary of the Treasury then made a loud statement that the "trade war is averted", after which the demand for protective tools dropped significantly, and the dollar began its next offensive.
But just a week after the loud statements of the US minister, the fundamental background began to change its picture, and not in favor of the dollar. First, the Chinese side was not in a hurry to report on the resolution of the trade conflict. All statements were veiled, their common sense was that the discussion of the details was not yet complete.
A little later, there was a resonant tweet from Donald Trump, who voiced dissatisfaction with the negotiation process. In his opinion, it is too early to talk about concluding a deal, and the parties are only "at the beginning of a long journey". After that, he denied the return of the Chinese corporation ZTE to the US market, significantly tightening the terms of the penalties (a fine of almost $ 1.5 billion and personnel reshuffle in the company's management). By the way, congressmen, both representatives of Democrats and Republicans, spoke out against Trump's position. In their opinion, this Chinese company should not be in the US market under any circumstances.
However, all of the above facts were only a "prelude." Yesterday, Donald Trump decided to introduce customs duties of 25% on imported goods from China for a total of $ 50 billion. This turn of events indicates that the trade war was never canceled or even suspended. In fact, the White House acted contrary to the statement of its official, who announced the prevention of "military operations".
The market can not yet assess the degree of influence of the imposed duties, since a full list of goods that will be subject to duties will be published only in two weeks (June 15). It is only known from the promulgated application that the new tariffs will apply to those goods that are relevant for the technologies of the program Made in China 2025.
Here, it is necessary to clarify that this ten-year program was developed three years ago. Its goal is China's absolute technological independence in ten major industries (from microchips and biomedicine to robots and airliners). The implementation of this plan will allow the Chinese people to oust from the domestic and global markets not only the Americans but also other foreign competitors. The intentions of the Celestial Empire are more than serious. According to preliminary estimates, Beijing will spend more than $ 300 billion on this project, although the real cost figure can be much higher.
Donald Trump as an entrepreneur understands the danger of this strategy for the national security of the States. However, many large businessmen and American politicians have sounded alarmed about this since 2015. Now, Trump has the leverage to oppose the possible hegemony of China, and, apparently, he intends to do it. In a statement yesterday, the White House clarified that, in addition to new duties, America will introduce "point" restrictions on investment activities with respect to some Chinese companies and even individuals who acquire industrially significant technologies.
Also, the US promised to bring the dispute with Beijing to the WTO "to the victorious end." Here, we are talking about joint US-Chinese companies. The essence of the conflict lies in the fact that the Chinese refuse to issue licenses for the activities of American companies in their country if the Americans refuse to pass on to them the secret of innovative technologies. Washington considered such actions as discrimination and lodged an appropriate complaint with the WTO. By the way, the PRC also conducts a lawsuit with Washington in the World Trade Organization. On April 5, the Chinese complained to the WTO on the future 25 percent increase in US customs duties on goods from China. As we can see, this fact did not influence the determination of Trump, since the new tariffs will start operating in June.
In addition, yesterday it became known that the Americans decided to tighten the issuance of visas to Chinese citizens. So far, this is an unofficial information, but with reference to a representative of the US State Department. Now, Washington will have the right to limit the validity of the visa to one year. First of all, we are talking about Chinese students who study robotics, aircraft engineering, and other high-tech sciences. Also, a special list of American companies was drawn up in the US Department of Commerce. Chinese citizens who work in these companies will have to obtain additional special permits from several government agencies to extend or obtain a visa. The new rules will be in force very soon, from June 11.
Thus, the trade war between the US and China was continued, despite the optimistic comments of the US Treasury Secretary. China has so far replied with restraint, but weighty, saying that it "reserves the right to take action in response to investment restrictions."
The market did not expect such an abrupt 180-degree turn in this issue, so the consequences did not wait. The dollar index fell to 93 points, the yield of 10-year US bonds fell to 2.7-2.8%, and the demand for protective tools increased again.
If we talk directly about the dollar / yen pair, then traders also focus exclusively on the external fundamental background. Therefore, the aggravation of the US-China crisis will allow the bear to break through the level of resistance at 108.30 (the bottom line Bollinger Bands on D1) and subsequently fall into the area 106-107. To do this, you need a powerful information reason. In the last few days, traders have tried three times to break through the above level, but in vain. However, the fundamental background indicates that protective tools will again be "in vogue" in the foreseeable future, so the yen will still demonstrate impulse growth.