USD/JPY still depressed near 112.00

The greenback stays entrenched in the negative territory today and is now taking USD/JPY to the 112.neighbourhood, near session lows.

USD/JPY weaker on US yields

Spot has come under renewed selling pressure after Republicans failed to bring to legislation a renewed version of the ‘Trumpcare’ late on Monday, sparking a sharp sell off in the buck and at the same time dragging US yields further south.

In fact, yields of the US 10-year reference remains in weekly lows in sub-2.30% levels, at shouting distance from last week’s lows around 2.28%.

US money markets remain highly dependent on expectations of further tightening by the Fed in the second half of the year, with the probability of a rate hike in December - the most likely candidate among traders – hovering around 45% according to CME Group’s FedWatch tool, and based on Fed Funds futures prices.

Adding to JPY buying, a recent poll by news agency Reuters suggested that the BoJ is likely to pull back from ultra easy policy.

USD/JPY levels to consider

As of writing the pair is retreating 0.52% at 112.04 and a break below 111.99 (low Jul.18) would expose the 111.96/70 band, where converge the 55-, 200- and 100-day sma and finally 111.66 (50% Fibo of 108.81-114.51). On the other hand, the next up barrier is located at 112.63 (21-day sma) seconded by 113.16 (23.6% Fibo of 108.81-114.5) and then 113.20 (10-day sma).