USD/JPY refreshes 8-week lows, moves closer to 109

The USD/JPY remained under pressure through out the day on Thursday as the JPY, as a safe-haven, continues to benefit from escalating geopolitical tensions between the U.S. and North Korea. As of writing, the pair is trading at its lowest level since mid-June at 109.16, losing 90 pips, or 0.8%.

In the NA session, US President Donald Trump was out on the wires ahead of a security briefing, saying that his "fire and fury" warning to North Korea maybe wasn't strong enough and they would be in serious trouble if they didn't get their act together. Commenting on these recent developments "some suspect that the US rhetoric is aimed at putting more pressure on China, but others appear to see the US visceral response as part of the current administration's modus operandi," BBH analysts argued.

• US Pres. Trump: Maybe 'fire and fury' statement wasn't 'strong enough' - AP
• US-North Korea tensions remains escalated – BBH

The risk aversion theme is apparent in the bond and stock markets as well. The higher demand for the U.S. Treasury bonds is pushing their yields down with the 10-year reference trading at 2.206%, losing 1.6% on the day. In the meantime, the Dow Jones Industrial Average is down 1.15% while the S&P 500 is dropping 1.25%.

• Wall Street extends losses as geopolitical concerns weigh

The market sentiment is likely to dominate the price action of the pair ahead of the CPI data from the United States, which is scheduled to be released at 12:30 GMT on Friday. Markets expect the consumer inflation to increase by 0.2% and 1.8% in July on a monthly and yearly basis respectively.

Technical outlook

With today's downfall, the RSI on the daily graph eased to the 30 mark, suggesting that the pair is likely to make a technical upward correction before it drops further. On the downside, 108.95 (Jun. 14 low) could be seen as the initial target ahead of 108.10 (Apr. 17 low) and 106.85 (Nov. 14, 2016, low). On the flip side, resistances align at 110 (psychological level), 110.75 (20-DMA) and 111.45 (100-DMA).

• JPY: Geopolitical risk in East Asia – Deutsche Bank