USD/JPY plunges to over 1-week lows, near mid-109.00s

   •  Escalating US-China trade tensions underpins JPY’s safe-haven demand.
   •  Falling US bond yields weigh on USD and add to the downward pressure.
   •  Technical selling below 200-DMA further aggravates the bearish momentum. 

The USD/JPY pair continued with its steep decline through the late Asian session and tumbled to over one-week lows in the last hour.

The US President Donald Trump threatened to impose additional tariffs on China and raised worries about a full-blown trade war between the world’s two largest economies. Escalating US-China trade tensions triggered a fresh wave of global risk-aversion trade and was eventually seen underpinning the Japanese Yen's safe-haven demand.

The risk-off mood was evident from a sharp fall in the US Treasury bond yields, which exerted some additional downward pressure on the US Dollar and further contributed to the heavily offered tone surrounding the major.

The pair dropped back below the very important 200-day SMA, with some fresh technical selling/long-unwinding trade also seemed aggravating the selling pressure to an intraday low level of 109.55.

With today's slump, the pair has now retreated nearly 140-pips from the 111.00 neighborhood, or three-week tops set last Thursday and now seems vulnerable to head back towards retesting the 109.20 support area. 

Technical Outlook

Omkar Godbole, Analyst and Editor at FXStreet notes, “the break below 200-day MA and the bear flag breakdown has turned the tide in favor of the bears. So, a drop to 108.11 (recent low) could be on the cards. A violation there would expose 106.82 (bear flag breakdown target).”

“However, a deeper drop will likely remain elusive if the pair holds the ascending (bullish) 50-day MA, currently located at 109.32, and moves back above the 200-day MA in the next 48-72 hours,” he further added.