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  • Fears of a full-blown US-China trade war boosted the JPY’s safe-haven demand.
  • Sliding US bond yields weighed on the USD and further added to the selling bias.
  • Investors now look forward to the US monthly jobs report for a fresh impetus.

Having failed to capitalize on its early uptick to 107.25 area, the USD/JPY pair dropped to fresh multi-month lows during the early European session on Friday.

The pair remained under some heavy selling pressure on Friday and added to the overnight slump of over 200-pips – marking its biggest single-day drop in two-years, triggered by the US President Donald Trump’s decision of new tariffs on more Chinese goods.

Trump on Thursday announced that his administration would impose an additional 10% tariff on the remaining $300 billion worth of Chinese imports on Sept. 1 and rattled global financial markets, which provided a strong boost to traditional safe-haven assets.

Meanwhile, the latest leg of a sudden drop over the past hour or so came after China’s Ministry of Commerce (MOFCOM) reiterated to take countermeasures if US tariffs take effect and that China is not afraid of a trade war.

The global flight to safety was evident from a follow-through slide in the US Treasury bond yields, which further exerted some downward pressure on the US Dollar and collaborated to the pair’s ongoing slide to the lowest level since early-January flash crash lows.

It would now be interesting to see if the pair is able to find any support at lower levels or continues with its bearish trajectory, despite highly oversold conditions, as the focus now shifts to Friday’s important release of the closely watched US monthly jobs report – NFP.

Technical levels to watch