USD / JPY falls to week-long lows, below 110.00 amid falling US bond yields

• USD / JPY fell more than 50 pips from daily highs amid new USD sell bias.
• The decline in US bond yields appeared to be the only factor weighing on the dollar.
• The optimistic US economic outlook should help limit any further decline for the pair.

The pair USD/JPY it updated daily lows during the early days of the American session, and bears are now looking to extend the slide below the key psychological 110.00 level.

The pair struggled to capitalize on its positive intraday move, instead encountering new offers near the 110.55 region and slipping into negative territory for the second session in a row. This also marked the third day of a drop in the previous four and was sponsored by a combination of factors.

The ongoing pullback drop in US Treasury yields dragged the US dollar closer to the more than one-week lows touched earlier this Tuesday. Apart from this, a generally softer tone in the US equity markets held the Japanese yen as a safe haven and contributed to the USD / JPY plunge of more than 50 pips.

With the last leg down, the USD / JPY has now broken below the 200 hourly SMA and appears vulnerable to further decline. That said, the prospects for a relatively faster US economic recovery from the pandemic should continue to prop up the dollar and help limit the pair’s slide, at least for now.

In the absence of major economic releases to move the US market, it will be wise to wait for some follow-up selling before confirming that the USD / JPY has peaked in the near term. Therefore, any subsequent decline is more likely to attract some buying on the dips and remain capped near the 109.40-35 resistance breakout point.

Technical levels