The USD remains the main beneficiary of trade tensions, which is easy when it has a solid macro back-up. The labor market is growing further, consumption is growing, and in leading indicators, there are no signs of concerns on the part of business and households about the effects of trade wars. Even the Fed officials make constructive comments. Yesterday, Charles Evans, a dove who voted against the hike in December, now sees room for one or two until the end of this year. Moreover, WSJ published an interview with the head of the Fed branch in Cleveland Loretta Mester, who has hawkish views (and the right to vote this year). Mester said that the economy is surely able to sustain two more interest rate hikes this year. In her opinion, if the Fed will postpone increases, it may be late with a reaction to the signs of overheating. According to Mester, the neutral rate is 3.0%. There are no surprises here and the market accepts comments neutrally.

Today in the calendar data on June inflation, where consensus counts on a moderate increase of 0.2% m/m, which will push core inflation to 2.3% y/y. A stronger reading and response of the debt market may become a good catalyst for the USD rally.

AUD, NZD, but also SEK and NOK remain the most sensitive to risk aversion and escape to the USD. Considering China's involvement in the conflict and the pressure on the prices of industrial raw materials, AUD has the most difficult situation and one can expect it to go even further in time. An impressive novelty is the USD/JPY rally, especially as it is in conflict with correlations with the stock and debt market. It seems as if the yen ceased to be treated as a "safe haven" and is seen as the currency of the Asian economy, where foreign trade plays a major role. If there is still someone on the market who wants to hedge the risk by buying a yen, it can now be in an uncomfortable position.

Let's then take a look at the USD/JPY technical picture at the H4 time frame. The market is in a clear uptrend with a local high at the level of 112.62, but the bulls are heading towards the level of 113.37 minimum. The nearest technical support is seen at the level of 111.39. The market conditions are starting to become overbought slightly, but the momentum remains positive and strong.