- Escalating geopolitical tensions weigh on the sentiment.
- 10-year US T-bond yield erases more than 3% on Friday.
- US Dollar Index retreats to 98 area ahead of inflation data.
After finding resistance near 110 on Thursday, the USD/JPY pair came under strong selling pressure on Friday and slumped to its lowest level since January 31 at 108.71. As of writing, the pair was losing 0.77% on a daily basis at 108.75.
In the early trading hours of the Asian session, U.S. President Trump announced that the U.S. will start imposing 5% tariffs on all Mexican imports to trigger a fresh wave of flight-to-safety. Furthermore, a spokesman for China’s Commerce Ministry on Friday said that China was setting up a list of “unreliable entities” to combat foreign firms that cut supplies to China to further escalate the tension between the U.S. and China.
The market reaction to these developments forced the 10-year U.S. Treasury Bond yield to lose more than 3% on the day and dragged it to its lowest level since September 2017. The JPY also capitalized on the risk-off mood and gathered strength against its major rivals.
Meanwhile, the S&P 500 Futures is losing more than 1% on the day, suggesting that major equity indexes in the U.S. are likely to suffer heavy losses and help safe-havens preserve their strength in the second half of the day.
On the other hand, ahead of the Personal Consumption Expenditure (PCE) Price Index data, the Fed’s preferred gauge of inflation, the US Dollar Index is floating a little above the 98 mark.
Technical levels to consider
The pair could face the initial support at 108.50 (Jan. 31 low) ahead of 108 (psychological level/Jan. 14 low) and 107.75 (Jan. 10 low). On the flip side, resistances align at 109.60 (daily high/20-DMA), 110 (psychological level) and 110.65 (May 21 high).
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