USD/JPY inches closer to 110 as greenback sell-off accelerates

• Richmon Fed reports slowing activity in the manufacturing sector.
• DXY drops to multi-year lows below 90.
• Wall Street stays flat during the first half of the session.

The USD/JPY came under a renewed selling pressure in the NA session and fell to a fresh six-day low at 110.27. As of writing, the pair was trading at 110.30, down 60 pips, or 0.55%, on the day.

The latest drop witnessed in the pair seems to be the product of an increasing bearish pressure surrounding the greenback. The only data from the U.S. on Tuesday showed that the Richmond Fed Manufacturing Index plummeted to 14 in January from 20 in December with the shipments and employment sub-indexes weighing on the composite index. Although this data doesn't usually impact the greenback in a significant way, it was bad enough to grab the sellers' attention. At the moment, the US Dollar Index is at its lowest level since December of 2014 at 89.88, where it's losing 0.3% on the day.

Earlier today, the Bank of Japan announced that it kept the policy rate and the amount of monthly QE purchases unchanged at -0.1% and 80 trillion JPY respectively. However, the monetary policy statement noted that the inflation outlook improved somewhat towards 2% inflation target since the previous meeting, allowing the JPY to start gathering strength against its rivals.

During the early trading hours of the Asian session on Wednesday, trade balance figures from Japan will be released with the markets expecting the surplus to rise to 530 billion JPY from 113.4 billion JPY in December. 

Technical levels to consider

With a decisive break below 110.20 (Jan. 17 low), the pair could easily extend its losses to 110 (psychological level) before testing 109.50 (Sep. 14 low) next. On the upside, resistances align at 111.15 (daily high), 111.75 (200-DMA) and 112.30 (50-DMA).