USD/JPY Falls Victim To Safe-Haven Demand

The USD/JPY pair dropped dramatically on Monday after a plunge late last week, witnesses amid a widespread dollar selling following mixed labor market data from the US. The prices extended losses to late-March lows around 110.30 earlier in the day and has settled marginally below 112.00 since then.

The latest plunge in the pair was due to a fresh wave of safe-haven demand after Trump threatened tariff hike on China imports. Signs of escalation in the US-China trade war sent global markets lower and fueled demand for the Japanese yen as a result. Until recently, investors hoped that the US and China were getting closer to the deal, so the fresh Trump’s tweet on Sunday came as a surprise and disappointment for markets.

In this context, despite some local recovery, USD/JPY will likely remain under pressure in the short term as traders continue to closely monitor developments on the trade front. Further signs of escalation may send the pair even lower, with the next support in case of a break below 111.30 comes at 111.00.

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