USD/JPY risks bearish reversal on trade war fears

• Escalating US-China trade tensions and the resulting risk aversion in stocks seems to have put a bid under the JPY
• USD/JPY looks set to close on a negative today, confirming a bearish doji reversal.

The USD/JPY pair is trading on the back foot today, having created a doji candle on Friday.

At press time, the pair is trading at 110.48 - down 0.16 percent on the day. The Yen seems to have picked up a bid, tracking a 0.47 percent drop in the S&P 500 futures.

The risk aversion could be associated with trade fears. On Friday, Trump administration said it would impose tariffs on $50 billion of Chinese imports. In response, China announced additional 25 percent tariff on 659 US goods worth $50 billion.

Clearly, world's two biggest economies are closing on a full-blown trade war. Hence, the risk assets are under pressure and the flight to safety could continue in Europe and  North American session, sending the anti-risk JPY to fresh daily highs across the board.

A negative close today would confirm a bearish doji reversal, i.e. a short-term bullish-to-bearish trend change.

USD/JPY Technical Levels

Support: 110.21 (200-day moving average), 110.00 (psychological support), 109.27 (Ascending 50-day moving average)

Resistance: 110.74 (daily high), 111.00 (psychological hurdle), 111.40 (May 21 high).