USD/JPY takes a sharp U-turn on Trump, breaches 109.50

A renewed risk-off wave gripped Asia, in response to the latest comments from the US President Trump, sending the USD/JPY pair sharply lower from four-day tops of 109.83.

USD/JPY: Risk-off back in vogue?

The spot failed just below 20-DMA resistance located at 109.92, and came under aggressive selling pressure after the US President Trump threatened a government shutdown over the Mexican border wall funding, fuelling nervousness across the financial markets, which propped the safe-haven demand for the Yen at the expense of the  US currency.

As a result, the USD/JPY pair quickly eroded 50 pips and moved lower towards 109 handle, as souring risk sentiment dents the sentiment around the Asian stocks, with the Nikkei 225 index paring gains to now trade at daily lows of 19,431.50 points.

Moreover, a cautious tone sets into the markets as investors remain wary ahead of the Jackson Hole Symposium commencing this Thursday, with expectations that the Fed Chair Yellen may offer some hawkish hints on the US interest rates outlook.

Meanwhile, the pair also remains under pressure amid better-than expected Japanese flash manufacturing PMI report, which lifted the sentiment around the Yen, as markets look forward to the US flash manufacturing PMI and new home sales data due on the cards during the NA session.

USD/JPY Technical levels                 

To the topside, a daily close above 10-DMA located near 109.50 would shift risk in favor of a re-test of 109.92/110 (20-DMA/ round number) beyond which 110.37 (Aug 17 high) would be back on sight. A break below 109 (zero figure) would open doors for 108.58 (multi-month low). A break lower would yield a test of 108.11 (April lows).