USD/JPY edges lower as market pessimism strengthens

• USD/JPY drops further towards recent lows as US-China trade war renews, S&P cites further Yuan depreciation ahead.
• RBNZ’s double-barrel rate cut and geopolitical noise add weakness to the quote.

Following its U-turn during the Asian morning, the USD/JPY pair declines further to 105.93, before flashing 106.07, ahead of Wednesday’s European opening.

Traders fail to respect Tuesday’s recovery after China kept entertaining Yuan weakness, despite refraining from the previous day, while global rating agency S&P emphasizes the US-China trade relation to portray the future of the Chinese currency.

Also adding to the sentiment could be the Bank of Japan’s (BOJ) favor for easy monetary policy, as per the Summary of Opinions, together with the Reserve Bank of New Zealand’s (RBNZ) bigger than anticipated 0.25% rate cut to 1.0% mark. Additionally, geopolitical tension surrounding Iran and Turkey are also adding strength to the bears.

While reflecting the momentum, the US 10-year treasury yields slump to the lowest since October 2016 to 1.673% by the press time.

Given the return of policy bears joining on-going trade pessimism surrounding the US and China, markets can witness a further rise in the safe-haven demand, which in turn signals additional south-run of the USD/JPY pair.

Technical Analysis

Except crossing June month low, near 106.78, buyers can’t aim for mid-July low close to 107.20, which in turn increases the odds for the additional downpour to January low near 104.75.