USD/JPY drops to one-week lows, below 110.00 mark amid sliding US bond yields

• USD/JPY retreated over 50 pips from daily tops amid some renewed USD selling bias.
• Retreating US bond yields seemed to be the only factor weighing on the greenback.
• The upbeat US economic outlook should help limit any further downside for the major.

The USD/JPY pair refreshed daily lows during the early North American session, with bears now looking to extend the downfall further below the key 110.00 psychological mark.

The pair struggled to capitalize on its intraday positive move, instead met with some fresh supply near the 110.55 region and drifted into the negative territory for the second straight session. This also marked the third day of a downtick in the previous four and was sponsored by a combination of factor.

The ongoing retracement slide in the US Treasury bond yields dragged the US dollar back closer to over one-week lows touched earlier this Tuesday. Apart from this, a generally softer tone around the US equity markets underpinned the safe-haven Japanese yen and contributed to the USD/JPY pair's slide of over 50 pips.

With the latest leg down, the USD/JPY pair has now broken below the 200-hour SMA and seems vulnerable to slide further. That said, the prospects for a relatively faster US economic recovery from the pandemic should continue to underpin the greenback and help limit the downside for the major, at least for the time being.

In the absence of any major market-moving economic releases from the US, it will be prudent to wait for some follow-through selling before confirming that the USD/JPY pair has topped out in the near term. Hence, any subsequent fall is more likely to attract some dip-buying and remain limited near the 109.40-35 resistance breakpoint.

Technical levels to watch