USD/JPY rebounds above 110.00 despite broad USD weakness

• USD/JPY regained its traction after falling earlier in the day.
• US Dollar Index stays deep in the red below 92.00.
• Recovering US Treasury bond yields help USD/JPY push higher.

After closing in the positive territory last week, the USD/JPY pair started the new week under strong bearish pressure and dropped to its lowest level in a week at 109.71. In the second half of the day, however, the pair regained its traction and moved into the positive territory. As of writing, USD/JPY was up 0.1% on the day at 110.30.

US T-bond yields turn north

Earlier in the day, the broad-based USD weakness and falling US Treasury bond yields weighed heavily on USD/JPY. The US Dollar Index, which gained 2% last week, dropped below 92.00 on Monday and the benchmark 10-year US Treasury bond yield touched its lowest level since late February at 1.354%.

Although the greenback continues to have a difficult time finding demand during the American trading hours, the sharp U-turn witnessed in T-bond yields is helping USD/JPY push higher. Currently, the 10-year US T-bond yield is up 2.7% at 1.482 while the DXY loses 0.48% at 91.87.

The only data from the US revealed on Monday that the Federal Reserve Bank of Chicago's National Activity Index improved to 0.29 in May from -0.09 in April. Nevertheless, market participants showed little to no reaction to this reading.

There won't be any high-tier data releases from Japan on Tuesday and USD/JPY is likely to continue to react to fluctuations in T-bond yields.

Technical levels to watch for