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  • Fading safe-haven demand helped the pair to regain some positive traction.
  • US-China trade uncertainties might continue to cap any strong follow-through.

The USD/JPY pair spiked to fresh session tops, around the 106.20 region in the last hour, recovering the previous session’s losses to near one-week lows.
The pair on Tuesday struggled to capitalize on its early uptick to the 106.40 region and witnessed some intraday selling amid reviving safe-haven demand on the back of uncertainty over trade talks between the United States (US) and China. Reports suggested that the US had declined a request to delay tariffs on about $110 billion of Chinese imports that took effect over the weekend and triggered a fresh wave of global risk-aversion trade.
The global flight to safety was evident from renewed weakness in the US Treasury bond yields, which undermined the US Dollar demand and further collaborated to the pair’s downtick. The greenback was also pressurized by the disappointing release of US ISM manufacturing PMI and St. Louis Fed President James Bullard’s dovish remarks, supporting a 50bps rate cut at the upcoming FOMC meeting in September.
The USD bulls held on the defensive through the early European session on Wednesday, albeit a recovery in the global risk sentiment – as depicted by a positive trading mood around equity markets and reinforced by a goodish pickup in the US Treasury bond yields – helped the pair to regain some positive traction.
It, however, remains to be seen if the pair is able to capitalize on the up-move or once again meets with some fresh supply at higher levels amid the unrest Hong Kong, which might continue to boost the JPY’s perceived safe-haven status,  and absent relevant market-moving economic releases from the US.

Technical levels to watch