• USD/JPY drops from Friday’s close amid fresh risk aversion.
  • US Secretary of State Pompeo said the threats from the Chinese Community Party’s military advances are real.
  • US President Trump avoided major confrontations with China during Friday’s speech.
  • Jibun Bank Manufacturing PMI will decorate the calendar, US-China story could keep the traders busy.

USD/JPY declines to 107.72 amid the early Monday morning in Asia. The yen pair seems to portray the market’s fear of escalating tension between the US and China despite the former’s President Donald Trump stepped back from any sanctions on the later during the recent speech.

China’s SCMP cites fears of worsening American-Sino tensions…

Despite US President Trump’s diplomatic performance on Friday, the South China Morning Post (SCMP) relies on anonymous government adviser comments to say that Chinese groups calling for more ‘fighting spirit’ are getting the upper hand on those who favor calm and cooperation.

On the other hand, US Secretary of State Mike Pompeo also flashed red signals for the Asian major by saying that the Chinese Communist Party’s military advances are real. The US diplomat also said, in his latest interview by Fox, that President Trump will always keep us in a position where we can protect the American people.

The US leader, Donald Trump, refrained from any direct sanctions on China during his press conference on Friday. However, the Republican leader did show his dislike for the situation in Hong Kong due to the Asian major’s will to grab the power. This pushed the US to shun trade preferences given to Hong Kong, details of which are unclear.

Amid all these catalysts, Wall Street closed mixed on Friday while the US 10-year Treasury yields dropped over five basis points to 0.65%.

Traders may now pay close attention to the US-China headlines for near-term direction. On the economic front, Japan’s first revision to Jibun Bank Manufacturing PMI, expected 38.4, could offer immediate direction ahead of the US ISM and Markit Manufacturing PMI.

Technical analysis

A downward sloping trend line from May 19, currently near 107.90 offers immediate resistance to the pair ahead of multiple highs marked since April 16 around 108.10. On the downside, 107.40/35, comprising May 16 high and May 27 low seems to challenge short-term bears.