Search ForexCrunch
  • Flight-to-safety continues to dominate markets.
  • Major equity indexes in the U.S. are down more than 1.5%.
  • US Dollar Index climbs above 97.70.

The USD/JPY pair came under a renewed selling pressure in the NA session and slumped to 110.30 as the dismal market mood allowed the JPY to continue to gather strength as a safe-haven. As of writing, the pair was down 0.36% on a daily basis at 110.35.

The lack of fresh developments easing concerns over a prolonged trade war between the U.S. and China following the U.S. President Trump’s threat to raise tariffs on Chinese imports to 25% on Tuesday forced investors to stay away from risk assets. After starting the day deep in the negative territory, major equity indexes in the U.S. remained under pressure with both the Dow Jones Industrial Average and the Nasdaq Composite losing around 1.5% on the day. Additionally, the 10-year T-bond yield is at its lowest level since early April at 2.462%, erasing 1.6% to confirm the flight-to-safety.  

On the other hand, the broad USD strength seems to be keeping the pair’s losses for the time being as the currency continues to outperform its major European rivals.  The US Dollar Index was last up 0.17% on the day at 97.72. Today’s data from the U.S. revealed that the IBD/TIPP Economic Optimism Index rose to its highest level since February of 2004 at 58.6 to provide additional support to the greenback.

In the early Asian session on Wednesday, the BoJ is scheduled to publish the minutes of its April meeting. Furthermore, the  trade report from China will be looked watched closely as it could cause a shift in the market’s risk perception and impact the JPY’s valuation.

Technical levels to watch for

The pair could face the initial support at 110 (psychological level) ahead of 109.70 (Mar. 25 low) and 109.40 (Feb. 4 low). On the upside, resistances are located at 110.75 (100-DMA), 111.25 (50-DMA) and 111.55 (200-DMA).