USD/JPY erases gains as trade war fears weigh on risk sentiment

• JPY finds bids as mood sours in Asia.
• Kuroda talks policy normalization.

USD/JPY's move higher to 105.68 was short-lived as the uncertainty over Trump's tariffs continues to weigh on risk sentiment.

As of writing, the pair is trading largely unchanged on the day at 105.50. The S&P 500 futures are down 12 points or 0.46 percent. Meanwhile, the Shanghai Composite index has shed 5 points or 0.16 percent.

Consequently, the Yen recovered early losses. Also, on Friday, Bank of Japan (BOJ) governor Kuroda acknowledged the possibility of a stimulus exit for the first time and that too seems to have played a role in capping the upside in the USD/JPY around 105.68.

Ahead in the day, the spot could drop to 105.00 if the trade wars escalate and equities see a deeper sell-off.

USD/JPY Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, "the daily chart shows that the pair is well below its 100 and 200 DMAs, while the RSI retains its bearish slope near 31 after three consecutive declines supporting the ongoing trend. In the 4 hours chart, the pair has barely corrected higher, holding far below bearish 100 and 200 SMAs, and with technical indicators having bounced from oversold readings, still well into negative territory."

Support levels: 105.20 104.75 104.30

Resistance levels: 105.85 106.30 106.60