The recent escalation in the US-China trade war fueled an aggressive risk aversion, which in turn pushed the safe-haven yen higher. USDJPY registered fresh 2019 lows around 105.45 yesterday and remains under the selling pressure on Thursday.
Market sentiment has deteriorated after Washington determined China as a currency manipulator following a dip to 11-year lows in the Chinese yuan earlier this week. Now, the situation has stabilized somehow but investors remain alert and cautious, fearing further negative signals from the trade front. On a local basis, markets received some relief from stronger-than-expected China imports and exports data. In a wider picture, however, markets remain vulnerable to further losses amid the lingering threat of another escalation between the US and China.
Against this backdrop, USDJPY could go even lower despite some oversold signals, with bullish attempts will likely attract sellers, especially on the back of dramatically lower bond yields across the globe. Technically, the pair needs to regain the 107.00 barrier in order to see a weaker downside pressure. In the short and medium term, the dollar will likely remain volatile as trade tensions keep global financial markets unsettled.