USD/JPY clocks two-week low of 105.96 tracking losses in Asian equities

• Yen retains bid tone in Asia.
• Shanghai Composite drops 0.70 percent.
• Growing trade war fears likely to keep equities under pressure.

The USD/JPY pair extended the overnight loss to a two-week low of 105.96 in Asia as the Shanghai Composite and other Asian equity indices fell on growing fears of a global trade war.

President Trump declared yesterday that the US will impose steep tariffs on steel and aluminum imports, a move that is already being criticized as an indirect tax on consumers. Also, it is feared that China and other major trading partners may retaliate, leading to an all-out trade war.

Consequently, the Dow plunged 500 points and the 10-year Treasury yield fell from 2.87 percent to 2.79 percent. Further, the Asian stocks are also a sea of red. The Shanghai Composite index is down 0.7 percent and Japan's Nikkei is down 5 percent.

Also, DAX futures and FTSE futures indicate the indices are likely to open on a negative note. So, the Yen will likely remain well bid and the USD/JPY may extend the decline towards the Feb. 16 low of 105.55.

USD/JPY Technical Levels

As of writing, the spot is trading at 105.96 and looks set to test the immediate support of 105.62 (monthly 200-MA) - 105.55 (Feb. 16 low). A violation there would expose 105.00 (psychological support). A daily close below the same would shift attention to 103.48 (76.4% Fib R of June 2016 low - Dec. 2016 high).

On the higher side, a move above 106.38 (Feb. 26 low) would open doors for a corrective rally to 107.00 (200-hour MA) and 107.20 (overnight high).