USD/JPY tumbles to 1-week lows, risks confirming a bearish breakthrough 100-DMA
• The ongoing USD retracement from 1-1/2 year tops keeps exerting downward pressure.
• The global flight to safety underpinning JPY and adds to the downward momentum.
The USD/JPY pair remained heavily offered through the early European session on Tuesday and tumbled to over one-week lows in the last hour.
A combination of negative forces kept exerting downward pressure for the third consecutive session, with bearish traders now eyeing a sustained weakness below the very important 100-day SMA support.
The US Dollar extended its retracement slide from 1-1/2 year tops and continues to be weighed down by growing speculations that the Fed will signal a pause to its monetary tightening cycle at this week's meeting.
The concerns were evident from the recent fall in the US Treasury bond yields. In fact, yields on the benchmark 10-year US government bonds fell to the lowest level since August and dented the already weaker sentiment surrounding the greenback.
Apart from expectations of a dovish Fed, the pair was further pressured by reviving safe-haven demand for the Japanese Yen amid the prevalent risk-off mood, hit by the overnight rout on Wall Street and further reinforced by a negative tone around European equity markets.
It, however, remains to be seen if bears are able to maintain their dominant position and confirm a near-term breakdown or the pair continues to show resilience below the mentioned key support, held since late-April.
Technical levels to watch
A follow-through selling below the 112.25 region is likely to accelerate the fall towards the 112.00 handle, which if broken could further extend the downward momentum towards the 111.60-50 support area. On the flip side, the 112.60-65 region now seems to act as an immediate resistance, above which a bout of short-covering could lift the pair back towards reclaiming the 113.00 round figure mark.