USD/JPY drops to a session low of 108.33
Price is now closing in on last week's low of 108.29 as risk trades get hampered by a report that China is casting doubts over a long-term trade deal with the US.
Treasury yields have fallen to their lows for the day with 10-year yields down by over 2 bps to 1.75% currently while equities have also taken a bit of a hit with European equities seeing red across the board at the moment.
In the currencies space, the yen and franc are the main beneficiaries from the headlines as USD/JPY eases to a low of 108.33 and USD/CHF falling to 0.9865.
The aussie has seen its earlier gains vanish with AUD/USD at 0.6900 now and the kiwi has also pared earlier gains with NZD/USD at 0.6400 currently.
For USD/JPY, the tilt lower also comes as sellers lean on key technical levels as noted above. The 109.00 handle has been a stubborn resistance point this week and the 200-day MA (blue line) has helped to add another layer of resistance to limit gains.
Right now, sellers are back in near-term control and the near-term support at 108.29 will be eyed next before the 108.00 handle comes into play.
Looking ahead, I'd be wary of any official comments by US or Chinese officials that could potentially rebuke the earlier report.
But otherwise, this may just take the wind out of the sails for markets in the short-term. A "Phase One" trade deal is still definitely there, but it is merely plastering over a festering wound that will not heal any time soon.
