USD/JPY off lows, but holds weaker below 113.00 handle

   •    A fresh wave of global risk-aversion trade underpins JPY’s safe-haven status.
   •  US bond yield inversion weighing on USD and adds to the selling pressure. 
   •  Traders now eye US ADP report and ISM services PMI for some fresh impetus.

The USD/JPY pair came under some renewed selling pressure on Thursday and erased all of the modest recovery gains recorded in the previous session.

Global risk sentiment took a sharp knock following the Canadian arrest of the Chinese tech giant Huawei Technologies’ global CFO, who is set to be extradited to the US to face charges of violating Iran sanctions. 

The arrest provoked strong protest from China, which called it a violation of its citizens’ rights and re-ignited fears of a further escalation in tensions between China and the US. 

Scepticism over the recent progress made in trade relations between the world’s two largest economies triggered a fresh wave of global risk-aversion trade and boosted the Japanese Yen’s safe-haven status. 

Adding to this, an inversion in a part of the US Treasury bond yield curve, raising concerns about economic growth in the US, further weighed on market sentiment and kept the US Dollar bulls on the defensive. 

A combination of negative factors exerted some fresh downward pressure during the Asian session on Thursday and dragged the pair back closer to two-week lows, set earlier this week. 

The pair, however, once again managed to find some support near the 112.60-55 region, though the attempted rebound, so far, remained tepid and capped below the 113.00 handle.

Moving ahead, today’s US economic docket, highlighting the release of ADP report on private sector employment and ISM non-manufacturing PMI, will now be looked upon for some fresh impetus.

Technical levels to watch

Any subsequent fall is likely to find some support at 100-day SMA, around the 112.25 region, below which the pair is likely to accelerate the slide towards challenging the 112.00 round figure mark. On the flip side, the 113.15-20 region now seems to have emerged as an immediate resistance, which if cleared might prompt some short-covering move towards the 113.65-70 supply zone.

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