USD/JPY appears to be losing its spark amid trade war tensions

WITH the escalation of the Sino-US trade war, the dollar appears to be losing strength. Last week, China announced retaliatory tariffs, affirming the resumption of the tit-for-tat trade war between the world's two largest economies. With this issue affecting the global economy, many investors have turned to the safe haven Japanese yen, which the trade war has not directly involved.

With trade tensions giving rise to volatility, investors seems to be shunning the USD, resulting in the USD/JPY pair weakening below key support levels. On the whole, with acrimony between the US and China over trade issues persisting, more downside potential exists for the USD/JPY pair. Since the start of 2019, the USD/JPY pair has been on an uptrend, forming higher highs and higher lows, as US economic data performed better than other developed nations.

However, with American President Donald Trump releasing a series of tweets on May 5 that escalated Sino-US trade tensions, prices of the USD/JPY pair gapped down and broke below the uptrend line.