USD/JPY drops below 110.50 as 10-year US T-bond yield pares daily gains

• USD/JPY dropped into the negative territory after renewing monthly highs.
• 10-year US Treasury bond yield turned flat on the day following US CPI data.
• US Dollar Index fluctuates below 93.00 in the American session.

The USD/JPY pair climbed to its strongest level in a month at 110.81 on Wednesday but reversed its course in the American session. After reaching a new daily low of 110.40, the pair recovered modestly and was last seen posting small daily losses at 110.50.

Focus shifts to 10-year US Treasury note auction

Earlier in the session, the data published by the US Bureau of Labor Statistics revealed that core inflation, as measured by the Consumer Price Index (CPI), declined to 4.3% in July from 4.6% in June. Although this reading matched the market expectation, it caused the greenback to come under bearish pressure. At the moment, the US Dollar Index is down 0.1% on the day at 92.97.

Meanwhile, the benchmark 10-year US Treasury bond yield, which was up more than 1% during the European trading hours, turned flat on the day at 1.354% and made it difficult for the USD/JPY to stay in the positive territory.

Nevertheless, with Wall Street's main indexes starting the day higher and the S&P 500 notching a new record top, the improving market sentiment is not allowing the JPY to gather further strength and help USD/JPY limit its losses for the time being.

Later in the day, the 10-year US Treasury note auction, which will take place at 1700 GMT, will be watched closely by market participants,  

Technical levels to watch for