USD/JPY drops to mid-110s as Wall Street turns negative ahead of the closing bell

US Dollar Index looks to end the day lower on Tuesday.
Wall Street fails to stay in the positive territory.
The US 10-year T-bond yield loses 1% on the day.

Eren Sengezer FXStreet

The USD/JPY pair touched its best level since late May at 111.12 earlier today but failed to preserve its bullish momentum as the greenback continued to retrace Monday's upside. As of writing, the pair was trading at 110.55, losing 0.3% on the day.

Today's data from the United States showed that the IBD/TIPP Economic Optimism Index rose to 56.4 in July to beat the market expectation of 54.2 and the factory orders increased by 0.4% in May following 0.4% contraction seen in April. However, despite the upbeat data, the US Dollar Index failed to gain traction as the Business Conditions Index published by the ISM-NY eased to 55 in June from 56.4 in May. At the moment, the DXY is down 0.18% on the day at 94.43.

Meanwhile, the JPY seems to be benefitting from a lower appetite for risk in the NA session. After starting the day higher, major equity indexes are looking to end the holiday-shortened session in the red with the Dow Jones Industrial Average and the S&P 500 both losing 0.25%.

Moreover, the 10-year US T-bond yield, which usually shows a positive correlation with the USD/JPY's price action, is down nearly 1% on the day, helping the JPY stick to its gains against the buck.

Technical levels to consider

The initial support for the pair aligns at 110.35 (20-DMA) ahead of 110 (psychological level/50-DMA) and 109.55 (200-DMA). On the upside, resistances align at 111.00/05 (psychological level/Jul. 2 high), 111.40 (May 21 high) and 112 (psychological level).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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