USD/JPY slumps to 113.50, tracks the Nikkei 225 sell-off

  • Offered above 114 handle, falls nearly 50-pips.
  • Falls in tandem with the Nikkei 225 index.
  • China-US trade talks weigh.
  • US tax reform on tap.

Fresh buying interest seen in the Yen across the board amid a renewed risk-aversion wave, is seen pushing the USD/JPY pair towards the midpoint of 113 handle, having faced rejection just ahead of 114 levels.

Nikkei 225 plunges nearly 1000 points from 22-year tops

The sudden selling wave that gripped the USD/JPY pair is mainly on the back of comments from the Chinese President Xi, who talked up the prospects of boosting the country’s trade and imports with the US. Xi’s comments weighed heavily on the Japanese stocks, dragging the Nikkei 225 index sharply lower from multi-decade tops. The sell-off in the Japanese equities caught the markets off-guard and triggered risk-off moods, lifting the safe-haven Yen against its American counterpart.

More so, uncertainty around the US tax reforms also keeps the US dollar on the back foot, collaborating to the weakness in the spot. All eyes now remain on the US tax reform plan due to be unveiled later in the American morning. In the meantime, the pair will take cues from the broader market sentiment and US jobless claims release for fresh momentum.

USD/JPY Levels to consider                                                                                

Jim Langlands at FX Charts noted: “On the downside, support will be seen at 113.50, below which could then head back to the session low, to the daily Kijun at 113.20 and then at the Fibo level at 112.95 although this seems unlikely today. If wrong, a sustained break of 113.00 would see us back in the previous 112/113 range, where 112.75 would be the first level of support ahead of 112.30. On the topside, minor resistance now lies at 114.00, above which could return to 114.35/45 and above, towards the 114.73, 6th Nov high, but above which could see a test of the descending trend resistance, currently at around 114.90. A break of 115.00 would then see little resistance until 115.20 and then 115.50.”

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