USD/JPY struggles to recover to 110 as investors wait for fresh trade headlines

• Trump says they will continue to negotiate with China.
• Wall Street looks to open the day in the red.
• US Dollar Index posts moderate daily losses ahead of inflation data.

With the U.S.-China trade conflict remaining in the spotlight, the USD/JPY pair is having a difficult time making a meaningful recovery. After rising above the critical 110 handle earlier in the day, the pair failed to gather momentum and erased its daily gains. As of writing, the pair was virtually unchanged on a daily basis at 109.75.

As announced earlier this week, the U.S. hiked the tariff rate on $200 billion worth of Chinese goods to 25% from 10%. While markets are waiting for China to take retaliatory measure, U.S. President Trump took to Twitter to deliver fresh remarks on the trade dispute. “We will continue to negotiate with China in the hopes that they do not again try to redo deal!” Trump tweeted out and added: “We have lost 500 billion dollars a year, for many years, on crazy trade with China. No  more!”

The uncertainty surrounding the next development in the trade conflict seems to be hurting the market sentiment today. The S&P 500 Futures was last down 0.45% on the day, suggesting that Wall Street is likely to start the day in the negative territory. Moreover, the 10-year T-bond yield is struggling to make a meaningful recovery, losing 0.25% to reflect the dismal mood.

In the early NA session, the U.S. Bureau of Labor Statistics will release its inflation report. Although trade headlines are likely to be the primary driver of the market action in the second half of the day, a higher-than-expected CPI reading could help the greenback find demand. At the moment, the US Dollar Index is losing 0.07% on a daily basis at 97.35.

Technical levels to consider

The pair could encounter the first technical resistance at 110 (psychological level/daily high) ahead of 110.30 (May 8 high) and 110.80 (100-DMA). On the downside, supports are located at 109.50 (May 9 low), 109 (psychological level) and 108.70 (Feb. 1 low).