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  • The shift in the sentiment supporting the US-China trade deal renewed risk aversion.
  • A sustained break of 110.70 can fetch March lows back on the chart.

USD/JPY struggles around 100-day SMA level of 110.70 after it dropped to the 14-week long trend-line support on the US President Donald Trump’s tweets on early Monday.

Tweets from the US President Trump signaled on Sunday that the Republican leader chooses to differ from his earlier optimism surrounding the trade deal with China as he threatened to increase tariffs on Chinese goods’ imports from 10 to 25%. Mr. Trump also signaled to fetch $325 billion Chinese goods that are currently out of extra import duty zone to bear 25% tax.

While there was no immediate reaction from China on the news, global markets turned to risk-safety as the deal between world’s two biggest economies, which was previously considered almost done, now seems unclear after President Trump’s tweets.

As a result, the Japanese Yen (JPY) registered across the board strength and visited six weeks high against the US Dollar (USD).

Global barometer of risk sentiment, the US 10-year treasury yield, was also down nearly two basis points to 2.53%.

Looking forward, Japanese markets are closed for the Children’s Day holiday while fewer details are available from the US. However, risk aversion can continue dominating market moves as traders now await what China wants to say on President Trump’s action.

Technical Analysis

The sustained trading below the 100-day simple moving average (SMA) highlights chances of the pair’s further decline towards 110.30 and 109.70 support levels with 109.00 and 108.50 being follow-on numbers to watch in a case of additional south-run.

On the upside, 111.00 may limit the quote’s near-term advances, a break of which could recall 111.30 and 200-day SMA level of 111.55 on the chart.