USD/JPY reverses a dip to 106.80 amid downbeat US PPI, trade woes

• Heavy amid escalating trade tensions driven risk-off, poor US PPI.
• Focus turns to Powell’s speech for some reprieve.

The USD/JPY pair accelerated the recent declines and hit fresh session lows near 106.80 region after the US Producer Price Index (PPI) data fell short of market expectations and added to the persisting bearish tone.

US: Annual core PPI fell to 2% in September vs. 2.3% expected

Escalating US-China trade tensions – key driver

The price quickly managed to bounce off lows but remains below the 107 handle, as the risk sentiment dented by rising US-China trade risks after China said it is ready for retaliation to the US’ blacklisting of the 28 Chinese firms.

Meanwhile, the latest Bloomberg report that White House was looking to limit Chinese stocks within the government pension fund, knocked-off the Treasury yields deeper into the red and emerged as the main reason behind the fresh downside in the spot. The US benchmark 10-year Treasury yields are down -1.70% to 1.52 levels while the leading Wall Street indices are down about -0.50%.

The pair is likely to remains pressured amid rising trade tensions, as the focus now shifts towards the Federal Reserve (Fed) Chair Powell’s speech at 1830 GMT. Powell is due to deliver a speech titled "Data Dependence in an Evolving Economy" at the 61st Annual Meeting of the National Association of Business Economics, in Denver.

USD/JPY Technical levels to watch