USD/JPY drops to session lows, 110.00 mark at risk

Having posted a session high near 110.45 region, the USD/JPY pair ran through some fresh offers and reversed majority of the gains recorded in the previous session.

Spot stalled its recovery move from 1-1/2 month lows touched last week and was seen extending Friday's retracement from one-week high amid mildly weaker tone around the key US Dollar Index. Even a modest up-tick in the US treasury bond yields, on firming expectations that the Fed would eventually move towards raising interest rates on Wednesday, did little to extend any immediate support to the greenback and stalls the pair's retracement to sesssion lows.

Meanwhile, weaker trading sentiment surrounding global equity markets further supported the Japanese Yen's safe-haven appeal and collaborated to the pair's retracement back to the key 110.00 psychological mark.

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On the economic data front, the release of disappointing core machinery orders and mostly in-line with expected PPI print from Japan seems to have been largely ignored, with a fresh wave of global risk-aversion trade acting as an exclusive driver of the pair's movement at the start of a new trading week.

It would now be interesting to see if the pair is able to attract any fresh buying interest at lower levels or continues drifting lower ahead of this week's important US macro releases and the much awaited FOMC decision.

Technical levels to watch

Immediate support is pegged near 109.75-70 area, below which the pair is likely to continue sliding further towards 109.40-35 horizontal support en-route monthly lows support near 109.10 level (June 7 low). On the upside, 110.45-50 area might continue to act as immediate hurdle, above which a bout of short-covering could lift the pair beyond 110.80 level (Friday's multi-day high) towards reclaiming the 111.00 handle.