USD/JPY flirting with session lows, around mid-110.00s
• Renewed US-China trade tensions/global growth fears continue to underpin JPY’s safe-haven demand.
• The USD weighed down by concerns about rising interest rates and the US government shutdown.
The USD/JPY pair struggled to build on the overnight late rebound and met with some fresh supply near the 111.00 handle during the Asian session on Friday.
Renewed US-China trade tensions, coupled with global growth fears continued underpinning the Japanese Yen's safe-haven demand and turned out to be one of the key factors exerting some fresh downward pressure on the major for the second consecutive session.
Reuters reported on Thursday that the Trump administration was considering an executive order that would bar US companies from using products made by Chinese firms Huawei Technologies and ZTE, raising scepticism over a possible resolution in the tariff dispute between the world's two largest economies.
Meanwhile, an unexpected drop in industrial profits in China, along with weaker than expected US consumer confidence index revived concerns over deteriorating global growth outlook and drove investors back towards perceived safe-haven currencies, including the Japanese Yen.
The global flight to safety was evident from a fall in Japan 10-year bond yields falling below zero, for the first time since September last year, and remained supportive of the strong bid tone surrounding the Japanese Yen.
On the other hand, the US Dollar continues to be weighed down by expectations about an economic slowdown in the US, as a spillover effect from raising interest rates, and the US government shutdown, which further collaborated to the pair's heavily offered tone through the Asian session on Friday.
Moving ahead, today's US economic docket, featuring the release of Chicago PMI and pending home sales data, will now be looked upon for some fresh impetus on the last trading day of the week.
Technical levels to watch
Immediate support is pegged near the 110.35-30 region, below which the pair is likely to accelerate the fall towards challenging the key 110.00 psychological mark. On the flip side, the 110.90-111.00 region (200-day SMA) now becomes immediate strong resistance, which if cleared might trigger a short-covering bounce towards the 111.35-40 supply zone.