USD/JPY: Erasing corrective bounce to 110.00, tracking the drop in S&P 500 futures

• USD/JPY is reversing the corrective bounce, tracking the decline in the S&P 500 futures.  
• The pair has fallen back below 110.00 with US tariffs set to take effect at 12:01 am New York time.  

USD/JPY’s corrective bounce to 110.00 seen an hour ago is being erased at press time, possibly tracking the losses in the S&P 500 futures.  

The currency pair is currently trading in the red at 109.83, having bounced to 110.05 earlier today from the overnight low of 109.47 on renewed hopes of the US-China trade deal.  

The optimism, however, evaporated a few minutes before press time with the futures on the S&P 500 surrendering 0.10% gains seen in early Asia to trade 0.30% lower on the day. As a result, the anti-risk JPY is again pushing higher against the greenback.  

While the US-China trade talks have been extended, the planned US tariff hike on Chinese goods from 10% to 25% is still set to take effect at 00:01 hours Friday New York time.  

If both sides again fail to reach a deal, then Beijing may respond with its own set of tariff hikes, leading to further escalation of the trade war and increased demand for haven currencies like JPY.  

Technical Levels