USD/JPY plummets below 112 on N. Korea headlines

The USD/JPY came under a heavy selling pressure in the last hour and lost around 50-pips after the comments by North Korean foreign minister escalated the geopolitical tension, increasing the demand for safe-havens such as the JPY. As of writing, As of writing, the pair was trading at 111.75, losing 0.22% on the day.

Earlier in the day, the greenback strength was able to keep the pair afloat above the 122 mark despite the negative market sentiment seen at the beginning of the week. Over the weekend, speaking at the UN, North Korea's foreign minister Ri Yong Ho called the US President Donald Trump a 'mentally deranged person' for his speech at the UN earlier last week. Responding to Ho's comments, Trump tweeted out, "just heard Foreign Minister of North Korea speak at U.N. If he echoes thoughts of Little Rocket Man, they won't be around much longer!"

• N. Korean ForMin: Trump's comments over weekend were clearly a declaration of war

On Monday, Ho crossed the wires again, this time claiming that North Korea had the right t shoot down the strategic US bombers even if they were not in the North Korean airspace. Major equity indexes reacted negatively to these comments with the Dow Jones and the S&P 500 losing 0.4% at the moment, reflecting the risk-off mood. 

Despite that recent drop witnessed in the USD/JPY pair, however, the US Dollar Index is preserving its daily gains above the 92 handle, suggesting that the pair could find support before extending its losses any further. 

Technical outlook

The RSI on the daily graph is approaching the 50 mark, suggesting that the bullish momentum had lost strength. The first critical support aligns at 111.45 (200-DMA) ahead of 110.85 (100-DMA) and 110.00 (psychological level). On the upside, resistances could be seen at 112.00 (psychological level), 112.50 (daily high) and 113.50 (Jul. 14 high).

• USD/JPY now focused on 113.50 – UOB