USD/JPY: 5-day MA capping downside despite weak China data and Indo-Pak tensions

• USD/JPY is trading above 5-day MA, having picked up a bid at a low of 110.35 yesterday. 
• The 5-day MA support could be breached if equities turn risk-averse in response to dismal China data. 
• Indo-Pak tensions could escalate, sending risk assets lower. 

USD/JPY is trading in the red at press time, with downside capped near the 5-day moving average (MA), currently lined up at 110.83. 

China's manufacturing Purchasing Managers' Index for February came in at 49.2 missing the forecast of 49.5 by a narrow margin. The third straight below-50 print indicates a sustained deterioration in the activity despite the government's stimulus efforts. 

Meanwhile, Indian forces have been given a free hand to retaliate following Pakistan's act of war in India airspace. The tensions, therefore, are unlikely to die down anytime soon. 

Further, US Trade Representative Robert Lighthizer told a Congressional hearing yesterday that it is too early to predict an outcome in U.S.-China trade negotiations.

The equities, therefore, could come under pressure, pushing USD/JPY below the 5-day MA support at 110.83. The caution over trade optimism could also weigh over equities. On Wednesday, 

So far, however, Asian indicates have not shown signs of stress with names like Hang Seng, Shanghai Composite, and S&P/ASX 200 reporting gains. 

Technical Levels