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USDJPY: trade talks in focus

USDJPY: trade talks in focus

USDJPY is grinding lower for a second day on Thursday, with the price has slipped to the 110.00 area amid the prevailing risk aversion.

Traders continue to closely monitor developments in the bond markets as the yield on the benchmark 10-year Treasury note returned to its lowest level since 2017 on Wednesday.

The yen demand is also due to nervous expectations of the next round of US-China trade talks due to resume today. According to China's commerce ministry, Beijing is in full swing with the US on a trade deal and both sides have achieved progress in phone calls, but there remains much work to do. In the near term, any signs of progress on this front could provide support to the riskier assets and thus weaken the safe-haven yen demand.

In this scenario, the pair may bounce from the lows around 110.00 and get back above 110.50, with the next target lies around 110.70. This level is the immediate obstacle for bulls and a barrier on the way to the 112.00 handle. In the weekly charts, USDJPY needs to get back above the 100-SMA at 110.70 in order to further regain ground after a plunge seen last week.