USD/JPY drops in tandem with T-yields, 112.50 tested

The USD/JPY pair failed once again near 113 handle and consolidated in a 30-pips narrow range almost throughout the Asian session, before meeting fresh offers post-European open, which sent the rate sharply lower for a test of 112.50 level.

The spot closed in the bullish opening gap, induced by a positive reaction to a Macron-victory, and returns to the red zone amid a retreat in the treasury yields across the curve. Moreover, risk-off trades seeped back into markets, after the European equities turned negative in the wake of unwinding of Macron trades.

However, the losses remain restricted amid a broadly higher US dollar, mainly driven by an extension of the post-Macron profit-taking slide in EUR/USD during the European session. Attention now turns towards the US labor market conditions index (LMCI) due later in the NA session for fresh incentives on the pair.

USD/JPY Technical levels                 

A break above 112.98 (daily top) would expose 113.11 (classic R2/ Fib R3) and 113.50 (psychological levels). On the other hand, a breach of support at 112 (key support) could yield a test of 111.72 (May 2 low) and 111.22 (50-DMA).