USD/JPY slides to fresh daily low near 111.30 as trade fears weigh on market sentiment

• Wall Street opens the day in the red.
• US Dollar Index sticks to daily gains, struggles to break above 95.
• Trade concerns allow safe-havens to stay strong.

Despite the upbeat tone surrounding the greenback, the USD/JPY pair struggles to shake off the selling pressure as the JPY continues to find demand in the risk-off environment. After touching a fresh daily low at 111.30, the pair staged a modest recovery and was last seen trading at 111.44, losing 0.26% on the day.

On Wednesday, the White House announced that they could increase the tariffs up to 25% on $200 billion worth of Chinese goods compared to the original plan of 10%. Responding to this development,  China’s Commerce Ministry said that they were ready to retaliate if those threats were to materialize and the Foreign Ministry urged the U.S. to return to rationality on the trade dispute.

Meanwhile, the weekly data from the United States showed that initial jobless claims came in at 218K for the week ending July compared to analysts’ estimate of 220K. Furthermore, the ISM NY’s Business Conditions Index iöproved to 75 in July from 55 in June. The US Dollar Index was last seen at 94.90, where it was up 0.25% on a daily basis, limiting the pair’s downside for the moment.

On the other hand, major equity indexes in the United States started the day on a negative note and remain under pressure. The CBOE Volatility Index, Wall Street’s fear gauge, is currently up 8% on the day to reflect the risk aversion in the markets.

In the early trading hours of the Asian session, the BoJ is going to publish the  monetary policy meeting minutes. Commenting on the announcements following the last meeting,  “For now, the BOJ’s message (downgrade in inflation forecast and “an extended period of time” in the statement) seems clear: it is likely to keep the current low level of interest rates unchanged for a longer period of time than market expected, and it is too early to expect the potential exit of the policy,” Nomura analysts said.

Technical outlook

The immediate support for the pair aligns at 111.30 (daily low) ahead of 110.80 (50-DMA) and 110 (psychological level). On the upside, resistances align at 111.75 (20-DMA), 112.40 (Aug. 1 high) and 113.15 (Jul. 18 high).