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  • A combination of factors prompted some aggressive selling around USD/JPY on Tuesday.
  • Retreating US bond yields weighed heavy pressure on the USD and exerted some pressure.
  • A softer risk tone underpinned the safe-haven JPY and contributed to the intraday decline.

The USD/JPY pair continued losing ground through the mid-European session and dropped to fresh two-week lows, around the 104.55 region in the last hour.

The pair witnessed some heavy selling on Tuesday and extended last week’s retracement slide from near three-month tops, around the 105.75 region, or levels just above the very important 200-day SMA. The USD/JPY pair has now erased its gains recorded in the previous week and was pressured by a combination of factors.

Investors turned cautious amid doubts about a relatively faster US economic recovery following the release of rather unimpressive US jobs report on Friday. This, along with a pullback in the US Treasury bond yields, led to a broad-based US dollar weakness and was seen as a key factor exerting pressure on the USD/JPY pair.

Bearish traders further took cues from a mildly softer tone in the equity markets, which tends to underpin demand for the safe-haven Japanese yen. Adding to this, possibilities of some trading stops being triggered below the key 105.00 psychological mark aggravated the bearish pressure and contributed to the USD/JPY pair’s ongoing decline.

In the absence of any major market-moving economic releases from the US, the US bond yields will play a key role in influencing the USD price dynamics and provide some impetus. Investors will also keep a close eye on the broader market risk sentiment in order to grab some meaningful trading opportunities around the USD/JPY pair.

Technical levels to watch