USD/JPY drops sharply to 108.50 on JP reduced tax rates news

The yen demand returned to markets and dragged USD/JPY sharply lower, with the major extending its four-day winning after a brief correction seen in early Asia.

USD/JPY hits fresh 2-week lows

The dollar-yen pair met fresh supply near 108.85/90 region and gave-up 30-pips instantly in response to the latest headlines reported by the Japanese LDP, citing introduction of reduced tax rates with 2019 sales tax hike.

The news was read as negative for the Japanese stocks on the back of renewed growth fears surrounding Japan, particularly after the sales-tax hike delay decision announced by PM Abe earlier this week. At the time of writing, USD/JPY drops to fresh two-week lows of 108.54, down -0.28%, while the Nikkei trims gains and trades +0.17% around 16,590 levels.

Looking ahead, markets now look forward to the US jobs data lined up for release later today, with an upbeat NFP and wages print likely to bolster June/ July Fed rate hike bets.

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USD/JPY Technical levels to watch

In terms of technicals, the immediate resistance is located at 109.13/16 (daily high/ 50-DMA). A break above the last, the major could test 109.71/84 (20 & 5-DMA). While to the downside, the immediate support is seen at 108 (round number) and below that at 107.84/50 (Apr 28 Low/ psychological levels).