USD/JPY extends slide to 111.98, hits 2-week lows as US yields retreat

USD/JPY declined further after the beginning of the American session. The pair printed a fresh daily low under 112.00 but quickly rebounded back above. It remains above 112.00 but still under pressure. 

Weaker USD as Treasuries recovery

The US dollar lost strength across the board on Tuesday ahead of the release of the FOMC minutes on Wednesday. The slide was triggered by a rally in US bonds. The 10-year yield dropped from 2.36% to 2.32%, the lowest since Thursday. The decline in yields boosted the yen.

The Japanese currency also strengthened during the last hour as equity prices in the US moved away from record highs. The Dow Jones hit an all-time-high at 22,846 and at the moment of writing was below 22,800. 

USD/JPY broke below 112.25 and tumbled to 111.98, the lowest in two weeks. From Friday’s NFP highs it has fallen almost 150 pips. Price is consolidating below a relevant short-term support level and pointing to the downside. 

If yields continue to decline, USD/JPY is likely to follow. FOMC minutes on Wednesday and US CPI and retail sales data on Friday could affect the direction of the pair. Higher-than-expected data should boost the greenback, while a “hawkish” minutes or a low inflation reading could trigger a decline of the US dollar. 

Levels to watch 

To the upside, resistance levels are now seen at 112.20/25 (Sep 29 low), 112.45 (American session high) and 112.80 (daily high). On the flip side, supports could be located at 112.00, 111.80/85 and 111.45 (Sep 25 & 26 low)