USD/JPY steadies below 106.00 after slumping to multi-month lows
- USD/JPY dropped to its lowest level since March on Friday.
- Risk-averse market environment continues to provide a boost to safe-haven JPY.
- US Dollar Index looks to post its lowest weekly close in nearly two years.
The USD/JPY pair fluctuated around 107.00 during the first half of the day but came under strong bearish pressure with the souring market sentiment helping the JPY gather strength as a safe haven.
After breaking below 106.00 in the early American session, the pair extended its slide and touched its lowest level since mid-March at 105.76. With the trading action turning subdues at the end of the European session, the pair seems to have gone into a consolidation phase and was last seen losing 1% on the day at 105.80.
DXY extends slide, stocks remain under pressure
Escalating US-China geopolitical tensions following China's decision to retaliate to the closure of its Houston consulate by shutting down the US consulate in Chengdu caused risk-off flows to dominate financial markets on Friday.
Reflecting the dismal mood, Wall Street's main indexes started the day deep in the negative territory and further weighed on USD/JPY in the early American session.
Moreover, the greenback remained on the back foot with the US Dollar Index (DXY) slumping to its lowest level since September of 2018 at 94.41 and didn't allow the pair to recover its losses. At the moment, the DXY is down 0.36% on the day at 94.44 and the S&P 500 Index is losing 0.6% at 3,217.
Earlier in the day, the data published by the US Census Bureau showed that New Home Sales rose by 13.8% in June but was largely ignored by the market participants. Additionally, the IHS Markit's preliminary Manufacturing and Services PMI for July showed an improvement from June but fell short of market expectation.
Technical levels to watch for