• Renewed weakness in S&P 500 futures and Treasury yields knocks-off USD/JPY.
  • Risk-off in vogue amid fresh US-China trade worries following Trump’s tweets.
  • All eyes on US CPI and trade-related news for fresh impetus.

The USD/JPY pair witnessed a 20-pips drop over the last hour, as the buying interest gathered pace around the safe-haven Yen, with the European traders hitting their desks and reacting to the renewed worries over the US-China trade spat.

Risk-off remains at full steam heading into the European open, as markets remain jittery after the US President Trump took a tough stance on China, citing that he had no interest in moving ahead unless Beijing agrees again to four or five "major points".

Further, the sentiment also received a fresh blow following the latest report citing sources that the expectations for progress toward ending the trade war from the upcoming Trump-XI meeting are low.

Amid intensifying risk-aversion, the spot tracked a fresh round of selling in the S&P 500 futures and Treasury yields and hit fresh three-day lows at 108.31. In the day ahead, the risks remain skewed towards a test of the 108 handle, as suggested by the technical set up.

“The spot charted back-to-back daily candles with long upper shadows. A candle with a long upper shadow is considered a sign of buyer exhaustion. A break below 108.31 (Monday’s low) today would validate the buyer exhaustion near 108.80 signaled by the daily candles with long upper shadows and could yield a drop to fresh 2019 lows below 107.81,” FXStreet’s Analyst, Omkar Godbole, notes.

The focus now shifts towards the US CPI report for the month of May, with the headline figures likely to soften while the US-China trade-related headlines will continue to influence the major.

Technical levels to watch