USD/JPY off lows, still deep in the red below 110.00 mark

   •  Global risk-aversion trade prompts some aggressive selling on Tuesday.
   •  A sharp fall in the US bond yields adds to the downward pressure.
   •  Resurgent USD demand helps ease the bearish pressure and bounce off lows.

The USD/JPY pair trimmed some of its early steep losses to over one-week lows, albeit seemed struggling to move back above the key 110.00 psychological mark.

The pair extended last week's rejection slide from the 111.00 neighborhood and came under some intense selling pressure amid a global flight to safety. Escalating trade tension between the US and China triggered a fresh wave of global risk-aversion trade and was seen underpinning the Japanese Yen's safe-haven appeal.

However, resurgent greenback demand, with the key US Dollar Index surging to fresh seven-month tops, helped partially offset the ongoing sharp decline in the US Treasury bond yields and ease the bearish pressure. The pair has now rebounded around 30-pips from session lows as traders now look forward to the US housing market data for some fresh impetus.

Looking at the broader picture, the pair's inability to sustain above the very important 200-day SMA and a subsequent retracement slide reflect lack of bullish conviction. Hence, it would be prudent to wait for a strong follow-through buying the mentioned hurdle before positioning for any further near-term appreciation.

Technical levels to watch

Momentum beyond the 110.00 handle is likely to confront fresh supply the 110.20 region (200-DMA), above which the pair could head back towards testing the 110.65-70 supply zone. On the flip side, the 109.25-20 region, closely followed by the 109.00 handle might continue to protect the immediate downside, which if broken might turn the pair vulnerable to slide back towards May daily closing lows support near the 108.75-70 area.