USD/JPY continues to push lower below 110 despite USD strength
- USD/JPY erases Monday's gains as 110 continues to act as a strong resistance.
- US Dollar Index turns positive above 94.
- Wall Street points to a positive opening.
After closing the fourth straight day higher, the USD/JPY pair failed to extend its gains on Tuesday and retraced yesterday's upside. As of writing, the pair is trading at 109.70, around 10 pips above its daily low, and is down 0.1% on the day.
The pair's fall on Tuesday is difficult to explain with the greenback gathering strength against its other rivals and the market sentiment staying relatively neutral. Ahead of the Markit and ISM service sector PMI data, the DXY is sticking to modest gains at 94.10, where it's up 0.1% on the day. On the other hand, Wall Street is pointing to a higher opening with both the S&P 500 and the Dow Jones Industrial Average staying in the green in the pre-market trading.
Looking at the technical picture, we see that the 200-DMA is sitting where the 110 psychological level is located, and this formation may have triggered profit-taking and weighed on the pair. On the other hand, despite a lack of clear flight-to-safety, the 10-year US T-bond yield is down nearly 1% on the day, helping the pair make a downward correction.
Technical levels to consider
With a decisive break below 109.60 (daily low), the pair could edge lower toward 109 (psychological level/50-DMA) and 108.10 (May 29 low). On the upside, only a daily close above 110 (psychological level/200-DMA) could bring in more buyers and open the door to 110.50 (May 15 high) and 111.35 (May 21 high).