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  • Economic activity in the service sector loses momentum in the United States (US).
  • US Dollar Index fell sharply to 98.70 area on the disappointing data.
  • 10-year US Treasury bond yield is now down nearly 5% on the day.

The USD/JPY pair lost more than 50 pips in a matter of minutes in the American session on Thursday after the data published in the United States revealed that the business activity in the service sector expanded at a much softer pace than expected in September. As of writing, the pair, which touched its lowest level since early September at 106.49, was trading at 106.56, erasing 0.57% on a daily basis.

Bearish pressure surrounding the USD strengthens

The Institute for Supply Management’s (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) in September slumped to 52.6 from 56.4 in August and missed the market expectation of 55 by a wide margin. After spending the majority of the day fluctuating in a tight range near the 99 handle, the US Dollar Index turned south on the weak data and was last down 0.25% at 98.78.

The PMI reading also caused recession fears to escalate and weighed on the risk sentiment to provide an additional boost to the safe-haven JPY. Reflecting the shift in the market mood, the 10-year US Treasury bond yield extended its slide and is now losing 4.7% at 1.532%. Furthermore, Wall Street’s main indexes remain in the negative territory as investors stay away from risky assets.

There won’t be any macroeconomic data releases in the remainder of the session and the performance of major equity indexes in Asia could impact the pair’s action. Participants will also be paying close attention to the labour market data from the United States.

Technical levels to watch for