USD/JPY tests 2-week lows near 109.20, as Trump intensifies global trade war

• Risk-off back in vogue after US President Trump imposes new tariffs on Mexico.
• Japanese data dump, headline CPI: 1.1% vs 1.2% expected, Yen unfazed.
• Risk trends to drive the markets ahead of key US macro releases.

The Japanese Yen picked up fresh bids last hours after a renewed risk-aversion gripped the Asian markets on the reports that the US President Trump imposed new tariffs on Mexico, which intensified the global trade war fears.

As a result, the USD/JPY pair was knocked-off nearly 40-pips to 109.22, just ahead of the 2-week lows of 109.15 reached earlier this week. At the press time, the spot is seen making a minor comeback to near 109.35 region, still down -0.25% on the day. Meanwhile, the US S&P 500 futures drops -0.80% and 10-year Treasury yields slide -1.78%

The Yen pair ignored a slew of mostly downbeat Japanese data dump, as the macro news played a second fiddle to the persisting risk trends, against the background of the ongoing trade concerns. Markets flocked to safety in the traditional safe-haven Yen in times of market unrest and panic.

On Thursday, the USD/JPY pair attempted a dead cat bounce and test the 110 handle amid risk reset, having tracked the rebound in the US equity futures and Treasury yields. In the session ahead, the Yen is likely to remain broadly bid, as the European desks return from holiday and react to the negative trade news.

Therefore, the risks remain to the downside in the spot and a break of the 109 support area cannot be ruled ahead of the US Core PCE Price Index and UoM Consumer Sentiment data due for release later today.

USD/JPY Technical Levels