USD/JPY turns negative below 113 on N. Korea headlines

After advancing to its highest level in nearly three months at 113.43 in the early NA session, the USD/JPY pair reversed course and lost nearly 50-pips on escalating geopolitical tension. As of writing, the pair was trading at 112.77, losing 0.04% on the day.

Today's data from the U.S. showed that the total nonfarm employment decreased 33K in September after increasing 169K, reflecting the negative impact of hurricanes Harvey and Irma on small businesses. However, despite that drop in the NFP, unemployment rate eased to 4.2% from 4.4%. More importantly, average hourly earnings, which is the primary gauge of the wage inflation, grew by 0.5% in September, beating the market expectation of 0.3%. The CME Group FedWatch Tool's rate hike probability jumped above 90% following the data, lifting the US Dollar Index to its best level in 10 weeks above the 94 mark. 

• US: Storm-skewed report means nothing about anything – BBH
• CME Group FedWatch's Dec hike probability jumped above 90% on robust wage growth

However, Sputnik, a Russian media outlet, recently reported that North Korea was getting ready to test a ballistic missile that could reach the west coast of the U.S., triggering a risk aversion in the markets. The traditional safe-haven JPY found a robust demand and dragged the USD/JPY pair lower. Moreover, the news forced the US T-bond yields to erase their daily gains, pushing the DXY back below the 94 mark. At the moment, the index was at virtually flat at 93.75.

In the remainder of the session, investors will be following FOMC members Rosengren, Dudley, Kaplan and Bullard's speeches closely for fresh clues regarding the monetary policy outlook.

Technical levels to consider:

The pair could face the first hurdle at 113.40/50 (Daily high/Jul. 14 high) ahead of 114.50 (Jul. 11 high) and 115.00 (psychological level). On the downside, supports could be seen at 112.15 (20-DMA), 111.40 (200-DMA) and 111.10 (100-DMA).