USD/JPY retreats from 2019 highs, turns flat on the day below 110.50

  • US Dollar Index drops below 97 on Tuesday.
  • 10-year T-bond yield rises for the second straight day.
  • Wall Street looks to open the day in the positive territory.

The USD/JPY pair stretched higher in the early NA session after closing the day above 110 on Monday and touched its highest level since late December at 110.65. However, as the greenback started to lose strength on Tuesday, the pair reversed its course and erased its daily gains to turn flat on the day near 110.40.

The US Dollar Index, which touched its highest level since December 17 at 97.20 earlier in the day, dropped below the 97 mark in the early NA session. However,  the lack of significant macroeconomic data releases from the U.S. and yet another upsurge in the 10-year T-bond yield suggests that the DXY's recent fall is most likely a technical correction of the 8-day long rally.

Meanwhile, The S&P 500 Futures is adding 0.7% in the session and points out to a positive opening on Wall Street. If US stocks post decisive gains on Tuesday, the USD/JPY could continue to float above the 110 mark regardless of the USD weakness. 

In the remainder of the session, FOMC Chairman Powell will be delivering a speech but he is not expected to comment on the near-term monetary policy outlook. Kansas Fed President George is also scheduled to speak at an event in Kansas.  In the early Asian session on Wednesday, the Domestic Corporate Goods Price Index will be released by the Bank of Japan.

Key technical levels

The pair could face the initial support at 100 (psychological level) ahead of 109.65 (50-DMA) and 108.80 (Jan. 30 low). On the upside, resistances are located at 110.65 (daily high), 110.95 (Dec. 28, 2018, low) and 111.50 (200-DMA).

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