USD/JPY extends losses toward 111 as US T-bond yields turn negative

  • Greenback struggles to recover its losses.
  • US 10-year T-bond fails to stay in the positive territory.
  • USD/JPY loses more than 200 pips since Monday.

After recording heavy losses on Wednesday on the BoJ's announcement of a tweak to its asset purchases, the USD/JPY pair pushed lower on Thursday amid a broad-based USD weakness. As of writing, the pair was trading at its lowest level since late November at 111.08, losing 0.33% on the day.

Earlier today, the US Dollar Index dropped sharply after the data released by the U.S. Bureau of Labor Statistics showed that the Producer Price Index declined by 0.1% on a monthly basis in December, bringing the annual rate down to 2.6%. Both figures fell short of market expectations and weighed on the buck. The DXY, which plummeted to a fresh 6-day low at 91.54 was last seen at 91.60, where it was down 0.55% on the day.

Although major equity indexes in the U.S. surged to record highs, suggesting an improved market sentiment, the pair couldn't get rid of the selling pressure as the falling US T-bond yields didn't allow the USD to find demand. At the moment, the 10-year T-bond yield is down 0.7% at 2.531%.

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet, argues that following the break below 111.20, the pair is now targeting 110.80, where it bottomed last November. Bednarik further adds that 110 could be the next support below that level. According to the analyst, short-term resistances for the pair align at 112, 112.40 and 112.75. 

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