USD/JPY recovers a major part of its early fall, back above mid-110.00s

   •  Escalating US-China trade tensions prompt some fresh selling on Monday.
   •  Hawkish Fed underpinning the USD and helps limit deeper losses.

The USD/JPY pair has managed to reverse majority of its early slide and is now headed towards the top end of its daily trading range.

The pair came under some renewed selling pressure at the start of a new trading week and was being weighed down by reviving safe-haven demand amid escalating US-China trade tensions. 

The US President Donald Trump, on Friday, approved to impose a 25% tariff on around $50 billion of Chinese imports and prompted China to retaliate with a similar-sized set of levies, reviving fears of a full-blown trade war between the world's two largest economies.

The Japanese Yen further benefitted from upbeat export growth data for May, coming in to show a rise of 8.1% y/y as compared to a growth of 7.5% anticipated. The positive factor, to some extent, was negated by a larger than expected trade deficit of JPY 578.3 billion, primarily on the back of a surge in imports. 

Meanwhile, the market reaction to the latest trade developments has been rather muted, with monetary policy divergence between the Fed and other major central banks underpinning the US Dollar demand and helping limit deeper losses, at least for the time being.

There isn't any major market-moving economic data due for release from the US and hence, the broader market risk sentiment and the USD price dynamics might continue to act as key determinants of the pair's momentum. 

Technical levels to watch

Immediate resistance is pegged near the 110.75 horizontal level, above which the pair is likely to aim towards reclaiming the 111.00 handle en-route 111.40 resistance - multi-month tops set on May 21st.

On the flip side, the 110.30-25 region, nearing the very important 200-day SMA, might continue to protect the immediate downside and is followed by the key 110.00 psychological mark.