USD/JPY retreats below 106.00 despite broad USD strength

• USD/JPY broke below 106.00 in the late American session.
• 10-year US Treasury bond yield is down more than 3% on Wednesday.
• US Dollar Index clings to strong daily gains a little below 91.00.

After closing the previous four trading days in the positive territory, the USD/JPY pair extended its rally and touched its best level since September at 106.22 on Wednesday. However, the pair lost its traction in the late American session and was last seen losing 0.25% on the day at 105.78.

Falling US T-bond yields weigh on USD/JPY

During the first half of the day, the broad-based USD strength helped USD/JPY edge higher. With the US Census Bureau's monthly report showing an impressive 5.3% increase in Retail Sales in January, the US Dollar Index (DXY) rose above 91.00 for the first time in more than a week before going into a consolidation phase. As of writing, the DXY was up 0.42% on the day at 90.90.

However, the steep correction seen in the US Treasury bond yields made it difficult for USD/JPY to preserve its bullish momentum. At the moment, the benchmark 10-year US T-bond yield is down more than 3%.

Earlier in the day, Boston Federal Reserve President Eric Rosengren argued that the increase in the Treasury bond yields is pointing to anticipation that the economy will do better in the second half of the year.

Later in the session, the FOMC will be releasing the minutes of its February meeting. A significant reaction in Treasury bond yields is likely to impact USD/JPY's movements in the remainder of the session.

Technical levels to watch for