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  • USD/JPY has dropped below 106.00, having faced rejection at the 200-hour moving average earlier today.  
  • The pair has come under pressure, possibly due to the losses in the S&P 500 futures and heightened geopolitical tensions.  

The USD/JPY pair is feeling the pull of gravity in Asia, possibly due to losses in the S&P 500 futures.

As of writing, the currency pair is trading at 105.86, representing 0.22% losses on the day. Notably, the pair has shed more than 20 pips in the last hour or so.

The anti-risk Japanese Yen seems to have picked up a bid, tracking the 0.45% drop in the futures on the S&P 500.

The risk-aversion could be associated with the heightened tensions in the South China Sea. The guided-missile destroyer USS Wayne E. Meyer reportedly entered South China Waters without China’s permission.

In response, the Chinese People’s Liberation Army has asked the US to immediately cease such provocative actions and has pledged to take all necessary measures to defend China’s sovereignty.

Looking forward, the currency pair may drop further if the geopolitical tensions push Asian and European stocks lower.

Also, the Bank of Japan’s Suzuki was out on the wires earlier today, warning about the negative effects of lowering rates further. Suzuki’s comments could force markets to price out the prospects of more easing by the BOJ, leading to a rise in the JPY.

Technically speaking, the pair may find support at 105.59. A violation there would expose the 200-month moving average (MA), currently at 104.45.

On the higher side, a convincing break above the 200-hour MA at 106.17 is needed to weaken bearish pressures. The 200-hour MA has repeatedly capped upside since Aug. 26.

Hourly chart

Trend: Bullish above 200-hour MA

Pivot points