USD/JPY edges lower toward 110 as 10-year US T-bond yield erases this week's gains


  • 10-year US T-bond yield drops more than 1.5% on Wednesday.
  • Wall Street posts moderate losses ahead of FOMC minutes.
  • US Dollar Index floats above the 98 handle.

The USD/JPY pair struggled to extend yesterday's rally and came under a modest pressure on Wednesday as the market sentiment, once again, turned sour. As of writing, the pair was down 0.2% on a daily basis at 110.28.

Earlier today, the U.S. Treasury Secretary Mnuchin told reporters that he didn't have any plans to travel to China for a fresh round of trade negotiations. Moreover, President Trump said that he wouldn't work with Democrats on the infrastructure bill because of their "phoney investigations," to disappoint the markets. Reflecting the risk-off atmosphere, major equity indexes in the U.S. started the day in the negative territory and the 10-year Treasury bond yield erased all of its gains it recorded this week by losing more than 1.5% today.

On the other hand, with investors opting out to stay on the sidelines before the FOMC publishes the minutes of its May meeting, the US Dollar Index remains in the positive territory above the 98 handle, allowing the pair to limit its losses for the time being.

Previewing the event, "The edited minutes of the FOMC meeting permit a wider view into the deliberations of the FOMC governors.  If they are growing wary about inflation this is where it will show.  Any speculation or evident concern about low inflation will further boost market conviction that the next Fed move will be a rate cut," argued FXStreet Senior Analyst Joseph Trevisani.

Technical levels to watch for

The pair could face the initial support at 110 (psychological level) ahead of 109.80 (May 20 low) and 109.50 (May 17 low). On the upside, resistances are located at 110.60 (daily high), 110.85 (100-DMA) and 111.30 (200-DMA).

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