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  • USD/JPY erased majority of daily gains following US GDP data.
  • Falling US Treasury bond yields hurt USD in early American session.
  • US Dollar Index stays in the positive territory below 93.50.

The USD/JPY pair came under renewed bearish pressure in the early American session and erased the majority of its daily gains. As of writing, USD/JPY was up 0.08% on a daily basis at 105.00.

Flight to safety weighs on USD/JPY

According to the US Bureau of Economic Analysis’ advance estimate, the real Gross Domestic Product (GDP) in the US contracted by 32.9% on a yearly basis in the second quarter. Although this reading came in slightly better than the market expectation of -34.1%, the US Treasury bond yields turned south to reflect the negative impact of this data on risk sentiment.

With the 10-year US T-bond yield losing more than 6% on the day at 0.542%, the US Dollar Index turned south and was last seen at 93.35, where it was still up 0.1%.

Meanwhile, the S&P 500 futures are down 1.13%, suggesting that Wall Street’s main indexes are likely to open the day deep in the negative territory. If risk aversion intensifies during the American session, the JPY could continue to gather strength as a safe-haven and force the pair to extend its slide.

Commenting on the US GDP report, “the data shows the horrible blow dealt by coronavirus to the world’s largest economy,” said FXStreet analyst Yohay Elam. “It is essential to note that this plunge came despite massive government support – and efforts to reopen the economy.”

Technical levels to watch for