USD/JPY eases from monthly highs, trades below 107.50

• 10-year US Treasury bond yield turns south on Tuesday.
• Chinese PPI data seems to be weighing on market sentiment.  
• US Dollar Index edges higher toward 98.50 handle.

The USD/JPY pair gained around 40 pips on Monday and stretched higher during the early trading hours of the Asian session to touch its highest level since early August at 107.50. However, with the market sentiment turning sour on Tuesday, the pair struggled to preserve its momentum and is now consolidating its gains. As of writing, the pair was up 0.12% on the day at 107.35.

Risk sentiment changes on Tuesday

The data published from Japan showed that Machine Tool Orders in August contracted by 37.1% on a yearly basis. Additionally, Producer Price Index in China declined by 0.8% annually in August to weigh on major Asian equity indexes. Similarly, European equity indexes are also posting modest losses while the 10-year US Treasury bond yield is erasing more than 1% to confirm the risk-off mood.

Meanwhile, the data from the US showed that the NFIB Business Optimism Index in August fell to 103.1 from 104.7 in July but was largely ignored by the market participants. The only data release from the US later today will be the JOLTS Jon Openings, which is unlikely to have a significant impact on the markets.

At the moment, the US Dollar Index, which tracks the dollar’s value against a basket of six major currencies is up 0.13% on the day at 98.43, allowing the pair to cling to modest daily gains.  

Technical levels to consider