USD/JPY dips below 110, looks south on escalating US-China trade war

Escalating US-China trade war has put a strong bid under anti-risk JPY.
USD/JPY dipped below 110.00, bearish continuation pattern seen in 4-hour chart.

Omkar Godbole FXStreet Contributor

The USD/JPY fell to an eight-day low of 109.85 in Asia, possibly due to fast-moving US-China trade war and the signs of risk aversion in the financial markets.

The JPY picked up a strong bid in early Asia, pushing the USD/JPY below its 200-day MA of 110.22 after Trump asked US Treasury asked the US Treasury to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.

On Friday, the US announced tariffs on $50 billion worth of Chinese imports. In response, China slapped a 25 percent tariff on 545 American imports.

Clearly, world's two-biggest economies appear increasingly headed towards a long, griding trade war.

Hence, the risk assets are under pressure. For instance, the S&P 500 futures are down 0.76 percent. Consequently, the anti-risk JPY is on the offensive.

As of writing, the USD/JPY is trading at 108.90 and looks set to extend losses further.

USD/JPY 4-hour chart shows a bearish continuation pattern

The bear flag breakdown indicates the sell-off from the recent high of 111.40 has resumed and the pair could revisit 108.13 in a week or two.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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