USD/JPY: Flatlined in Asia amid trade war fears

• USD/JPY is sidelined around 107.05 in Asia amid escalating US-China trade tensions. 
• The US equities fell on Wednesday, pushing the JPY higher as the US blacklisted Chinese companies. 
• The pair may pick up a bid, as treasury yields are recovering the lost ground.

The USD/JPY pair is lacking a clear directional bias amid escalating trade tensions and risk aversion in the equity markets.

The USD/JPY pair is currently trading just above 107.00, representing marginal losses on the day, having faced rejection at 107.30 in the overnight trade.

The US stocks fell on Tuesday as tensions between the US and China escalated ahead of the critical trade talk scheduled to happen at the end of the week. The US threatened to blacklist the Chinese companies over human rights violations in Uighur province.

China urged Washington to withdraw its decision and threatened retaliation. The US, however, said that the plan to blacklist the Chinese companies was unrelated to trade talks. As a result, the S&P 500 index fell 1.56%, sending the traditional safe-haven assets higher.

As of now, the futures on the S&P 500 are reporting 0.21% gains. That could weaken the bullish pressures around the Yen, allowing a minor bounce in the USD/JPY pair.

Further, the yield on the US 10-year treasury note is showing signs of life. At press time, the yield is trading at 1.54%, representing a four basis point gain on the low of 1.50%. Therefore, the American Dollar may find some love.

However, gains, if any, will likely be reversed if China retaliates, leading to another round of sell-off in the stocks and treasuries.

Technical levels