- The trade tensions and the resulting risk-off is likely pushing the JPY higher.
- The USD/JPY printed a session low of 110.85 as the Asian equities dropped for the third straight day.
Currently, the USD/JPY pair is trading at 110.92, having hit a high of 111.19 earlier today.
The drop from the session highs is likely associated with the signs of risk aversion in the Asian equity markets.
As of writing, MSCI’s broadest index of Asia-Pacific shares outside Japan is down 0.6 percent and Japan’s Nikkei shed 0.5 percent, indicating the investors believe that the US President Trump will impose 25 percent tariffs on $200 billion worth of Chinese goods.
This would be a major escalation as the US has already applied tariffs on $50 billion worth of goods and more importantly, China is likely to retaliate in kind.
The risk-off mood seems to have put a bid under the anti-risk JPY. Further, the sell-off in the emerging market (EM) currencies is likely pushing the JPY higher.
Looking forward, the USD/JPY is set to take cues from the EM currencies, yield differential and the sentiment in the European equity markets.
USD/JPY Technical Levels
Resistance: 111.16 (50-day moving average), 111.83 (last week’s high), 112.15 (Aug. 1 high)
Support: 110.68 (Friday’s low), 110.36 (100-day moving average), 109.80 (200-day moving average)
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