USD/JPY slides to 1-1/2 week lows, below mid-113.00s amid risk-off mood

   “¢   A fresh wave of global risk-aversion trade underpins JPY’s safe-haven status.
   “¢   Bearish traders seemed unaffected by a goodish pickup in the USD demand.
   “¢   Technical selling below Asian session lows further accelerates the downfall.

Having faced rejection near the 114.00 handle, the USD/JPY pair met with some aggressive selling pressure and tumbled to 1-1/2 week lows in the last hour.

The pair extended last week’s corrective slide from 11-month tops and kept losing ground for the third consecutive session. The downfall seemed rather unaffected by a goodish pickup in the US Dollar demand and was fueled by the prevalent risk-off mood, which tends to boost the Japanese Yen’s safe-haven status.  

Against the backdrop of escalating US-China trade tensions, the PBoC on Sunday decided to lower the required reserve ratio (RRR) for some lenders by 1%. The moved weighed on the Chinese Yuan and undermined other emerging currencies.  

Adding to this, reemerging Italian budgetary concerns further dented investors’ appetite for riskier assets and extended some additional support to the safe-haven Japanese Yen. Italian worries were evident from the widening of Italian/German 10-year government bond yield spread, which now stands at 305 basis points.

Meanwhile, the latest leg of sudden drop over the past hour or so could also be attributed to some technical selling below Asian session lows support near the 113.65 area. Hence, a follow-through weakness, amid absent relevant market moving economic releases, now looks a distinct possibility.

Technical levels to watch

Immediate support is now pegged near the 113.10-113.00 region, below which the pair is likely to accelerate the slide towards its next major support near the 112.70-60 zone. On the flip side, any meaningful recovery attempt might now confront fresh supply near the 114.00 handle, which if cleared could assist the pair to head back towards the 114.50-55 hurdle.