USD/JPY drops back closer to 1-1/2 month lows, eyeing 111.00 mark

   •  USD selling aggravates on German political news.
   •  Surging US bond yields fail to lend any support.
   •  US CPI/monthly retail sales eyed for fresh impetus.

After an initial uptick to 111.44 level, the USD/JPY pair ran through some fresh offers and has now drifted into negative territory for the fourth consecutive session.

The news that German party leaders have reached a breakthrough in coalition talks aggravated the US Dollar selling pressure and has been a sole factor behind the pair's sharp slide over the past hour or so.

Even a goodish pickup in the US Treasury bond yields also did little ease the strong bearish pressure surrounding the greenback and stall the pair's slide back closer to 1-1/2 month lows touched in the previous session. 

The pair has now moved dangerously close to breaking below the 111.00 handle, and the recent price action now seems to suggest that the near-term downward trajectory might still far from being over.

Traders, however, are likely to await the release of today's important US macro data - the latest inflation figures and monthly retail sales, which could now possibly limit any deeper losses, at least for the time being.

Technical outlook

As Omkar Godbole, Analyst and Editor at FXStreet write: “Disappointing US data would add credence to the bearish set up on the daily chart and open doors for a drop to 110.00 levels.”

He further adds: "Upbeat US CPI and retail sales number (data due today at 13:30 GMT) would - 
   •  Add credence to the 4-hour bullish price RSI divergence and pair's successful defense of 111.03 (50% Fib R of Sep-Nov rally).
   •  Could push 10-year US-Japan yield spread above 253 basis points.
   •  & hence the pair may have a re-look at 112.00-112.20 levels.”