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  • The JPY is solid bid on risk aversion – DJIA closed below the 200-day MA on trade war fears.
  • The USD/JPY is revisiting previous day’s low 109.36 and may drop further as the VIX index (fear gauge) close above the psychological 15 level on Monday.

The USD/JPY is feeling the pull of gravity, courtesy of trade-related uncertainty and the resulting risk aversion in the US stock markets.

At press time, the currency pair is trading at 109.40 – down 0.33 percent. The Dow Jones Industrial Average (DJIA) is looking weak, having closed below the 200-day moving average yesterday – the first daily close below the key average since June 2016.

Further, the VIX index – widely known as the fear gauge – rose to 19.52 yesterday – the highest level since April 24 and closed well above the psychological hurdle of 15.00, signaling heightened risk aversion.

So, the USD/JPY could extend the decline towards 109.00, however, a quick recovery cannot be ruled out if stock markets unexpectedly pick up a bid.

USD/JPY Technical Levels

Resistance: 109.60 (50-day MA + rising trendline), 109.89 (5-day MA), 110.00 (psychological hurdle).

Support: 109.20 (June 8 low), 108.82 (38.2% Fib R of March 26 low – May 21 high), 108.16 (100-day MA).