USD/JPY tumbles to lows, 112.00 mark back on sight

   •  Persistent USD selling bias weighs for the third straight session.
   •  A sharp rebound in USTs fails to revive USD demand.
   •  Risk-off mood provides an additional boost to JPY’s safe-haven appeal.

After an initial uptick to 112.80 area, the USD/JPY pair came under some renewed selling pressure and dropped to fresh two-week lows in the last hour of trading.

The pair built on last week's downslide and has so far, traded with a bearish bias for the third consecutive session. Persistent greenback selling pressure, with the key US Dollar Index sinking to over 3-month lows near mid-91.00s, has been one of the key factors weighing on the pair.

Adding to this, a slight deterioration in investors' risk appetite, as depicted by weaker trading sentiment around European equity markets, provided an additional boost to the Japanese Yen's safe-haven appeal and further collaborated to the pair's downfall to 112.20-10 band.

Meanwhile, a sharp rebound in the US Treasury bond yields did little to revive the USD demand, with bears now eyeing a break below the 112.00 handle for confirmation of the pair's near-term bearish outlook.

With the only release of final US manufacturing PMI print, today's US economic docket lacks any major market-moving economic releases and hence, broader market risk sentiment and the USD price dynamics would continue to act as key determinants of the pair's momentum on the first trading day of 2018.

Technical levels to watch

A convincing break below the 112.00 handle would turn the pair vulnerable to extend the downslide towards testing the very important 200-day SMA support near the 111.65 region.

On the upside, any recovery attempts might now confront fresh supply near mid-112.00s, above which a bout of short-covering could lift the pair back towards 113.00 handle en-route 113.30-35 hurdle.