After posting small daily losses on Tuesday, the USD/JPY pair edged lower and touched its weakest level since early March at 107.88 on Wednesday. In the absence of significant fundamental drivers, however, the pair staged a technical correction and was last seen trading flat at 108.10. The sharp decline witnessed in Wall Street's main indexes helped the greenback find demand on Tuesday. The US Dollar Index (DXY) snapped a two-day losing streak and gained 0.15%. However, USD/JPY struggled to gain traction with the benchmark 10-year US Treasury bond yield losing more than 3%.
Currently, the DXY continues to inch higher and the 10-year US bond yield is clinging to recovery gains at 1.568%, helping USD/JPY stay in the positive territory. Meanwhile, the latest reports from Japan suggest that the government is considering declaring a state of emergency for Tokyo and Osaka amid rising coronavirus infections. On the upside, a break of 108.85 (no change in ‘strong resistance’ level) would indicate that the pullback in USD that started about 2 weeks ago has run its course. Looking ahead, the next support below 107.65 is at 107.30.