USD/JPY dips below 109.00 as S&P 500 futures report losses

• The Yen seems to have picked up a bid, tracking the decline in the S&P 500 futures.
• The USD bulls need to defend the key ascending trendline.

The USD/JPY pair fell to a session low of 108.97, possibly due to signs of risk aversion in the major US index futures.

As of writing, the S&P 500 futures are reporting a 0.27 percent drop and that could have put a bid under the anti-risk Japanese Yen.

Further, the 10-year treasury yield is on the retreat, now trading at 2.948 percent, having clocked a two-week low of 2.927 percent earlier today. The pair usually tracks the movement in the Treasury yields, hence the decline in the USD/JPY should not come as a surprise.

That said, the currency pair could regain poise if the S&P 500 futures turn positive. However, a sustained rally to 110.00 or above is likely if the US wage growth number, due at 18:30 GMT, betters estimates.

USD/JPY Technical Levels

The outlook remains bullish as long as the pair sits above the ascending trendline sloping upwards from the March 26 low and April 18 low. Currently, the pair is trading at 109.00 and the trendline support is seen at 108.65.

A close below 108.65 would mean the rally from the March 26 low of 104.63 has ended and would expose support lined up at 107.50 (April 5 high) and 106.88 (April 17 low).  

On the higher side, a move above 109.54 (April 27 high) would shift risk in favor of a re-test of 110.04 (61.8 percent Fibonacci retracement of Jan-Mar sell-off). A violation there would signal a continuation of the rally from the low of 104.63 and could yield a rally to 110.84 (Nov. 27 low).