USD/JPY reverses from 2-week highs, hits lows below 110.00

USD/JPY found a strong resistance around the 110.50 zone and turned to the downside. After the beginning of the American session, the pair started to decline and recently printed afresh daily low at 109.89. 

The rally of the US dollar that started on Tuesday lost momentum while the yen rose amid a recovery in US bond and a pullback in equity prices from daily highs. The 10-year yield dropped to 2.13% and the Dow Jones is up 0.21% at 21,940 below the higher it reached at 21,980. 

US economic data released earlier failed to boost the pair sharply above 110.50. Personal income and spending rose in July but the PCE Price Index dropped to 1.4% (annual), the lowest since December 2015. It is a measure that Fed’s official take as a relevant input. The number did not help expectations about another rate hike before year end. On Friday, the key report will be the NFP. 

Levels to watch 

To the upside, resistance might lie at 110.35 (20-hour moving average), 110.65 (daily high) and 110.95 (Aug 16 high). On the flip side, support could be seen at 109.90 (daily low), 109.50 (Aug 30 low) and 109.40 (Aug 28 high).