USD/JPY fades the drop to 110.80, reports gains despite risk-off sentiment

Currently, the USD/JPY pair is better bid above 111.00, having hit a low of 110.77 earlier today.

The anti-risk JPY had picked up a bid in early Asia, possibly due to reports that Trump administration is planning to impose additional tariffs on Chinese imports.

The news boosted fears of long drawn out trade war between the US and China. Consequently, risk aversion gripped markets, pushing JPY higher across the board.

As of writing, the JPY is reporting gains against most majors but is flashing red against the USD even though the S&P 500 future are still reporting a 0.65 percent decline.

Further, the US 10-year treasury yield is down close to three basis points at 2.84 percent, although it has trimmed losses.

So, the pair's recovery from 110.77 to 111.12 is somewhat surprising, but could be an indication the investors are not worried about further escalation of US-China trade war or the markets are focused on growing Fed-BOJ monetary policy divergence.

USD/JPY Technical Levels

The currency pair has cleared the resistance of the 2015-2018 falling trendline and that could entice technical traders, creating further upward pressure on USD/JPY exchange rate.

Resistance: 111.40 (May 21 high), 113.39 (Jan high), 113.75 (Dec high).

Support: 110.71 (10-day moving average), 110.28 (July 4 low), 110.00 (psychological support).