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  • Markets are starting to wake  up to  systemic risks.
  • “‹”‹”‹”‹”‹”‹”‹Italy and European politics driving risk-off sentiment.

USD/JPY has been chipping away to the downside and had made a fresh low of 108.10 in NY trade, stabilising there with  most of the hard work done  by the bears in European  trade during the politically  provoked bloodbath in the markets.  

At the time of writing, USD/JPY is trading at 108.42 in a calmer setting for the yen that picked up a strong bid in risk-off play on the back of the Italian contagion that has woken up investors to the systemic risks posed by the rise of populism once again.  

Global equities in a bloodbath

European equities finished up as follows:

  • Italy’s FTSE MIB is down -2.65%
  • Portugal’s PSI20 is down -2.58%
  • German Dax is down -1.6%
  • France’s Cac is down -1.4%
  • UKs  FTSE is down -1.2%
  • Spain’s Ibex is down -2.2%

As for Wall Street: The DJIA  closed down -391 points or 1.58% at 24361. The low reached 24247 at the lows.   The S&P fell -31.47 points or -1.16% at 2689.86 and the Nasdaq fell -37.26 points or -0.50% at 7396.59.

Trade wars back in vogue

At the same time, trade war angst came back into vogue. Trump has set dates for June for various tariffs on Chinese imports ahead of the next round of talks with Bejing due to take place as soon as this weekend.  

USD/JPY levels

Support 1:                  108.10 recent low.

Support 2:                  108.18 PP 1M, 100-D SMA meets  50-D SMA.
Support 3:                  106.82 S1 1M  

Resistance  1:             109.10 BB WB break up point.
Resistance 2:              109.76/92 21-D SMA / PP-1W  
Resistance 3:              110.89  R1-1W

Valeria Bednarik, chief analyst at FXStreet explained that in the 4 hours  chart, the pair has accelerated well below the 100 and 200 SMA, while technical indicators resumed their declines and reached fresh 1-week lows, heading into the Asian opening with a strong downward momentum. The 100 DMA stands at 107.70, a probable bearish target for the upcoming sessions should risk sentiment continues.