AUD, CAD on Top, JPY Drops as Tariff Fears....>

FOREX: AUD, CAD on Top, JPY Drops as Tariff Fears Overblown

-Despite the installation of another wave of trade-taxing tariffs on goods

heading from China to the US (and vice versa), risk assets rallied Tuesday,

helping commodity-tied FX to the top of the pile, and pressing CHF and JPY

(along with the USD) lower. In response to Trump's announcement on Monday, China

ratcheted higher the levy on US goods already subject to tariffs.

-USD/CAD dropped below the C$1.30 mark for the first time since Friday and

challenged last week's lows as reports suggested that trade representatives from

both Canada and the US would re-engage to sort out NAFTA. A break below C$1.2976

will be needed to turn the outlook more bearish.

-USD/JPY climbed through the overnight highs and cleared the best levels of last

week as 'buy the rumour, sell the fact'-type price action pressed Chinese and US

equities higher. Y113.17 becomes the target before the pair can eye 2018 highs.

-UK inflation, the Bank of Japan rate decision and US housing data are the

calendar highlights Wednesday, with a speech from BoE's Haldane and ECB's Draghi

also due.