USD/JPY corrects from multi-month tops, slides below 112.00 mark

• USD/JPY witnesses some long-unwinding following the two days of upsurge.
• A turnaround in the risk sentiment underpinned the JPY’s safe-haven status.
• Sliding US bond yields led to a subdued USD demand and did little to support.

The USD/JPY pair edged lower on the last trading day of the week and eroded a part of the previous day's strong gains to near 10-month tops.

The global risk sentiment was knocked down on Friday after the World Health Organization (WHO) officials warned the new coronavirus could break out globally at any time. Following two days of heavy selling, the Japanese yen found some respite from the prevailing risk-off mood.

The downside seems limited

The global flight to safety was further reinforced by a sharp fall in the US Treasury bond yields, which forced the US dollar to consolidate its recent strong gains to multi-year tops and eventually prompted some long-unwinding trade during the Asian session on Friday.

The pair has now retreated back below the 112.00 round-figure mark, albeit the downside is likely to remain cushioned, all against the backdrop of the recent weakness in the Japanese macro data and mounting concerns over deepening economic fallout from the coronavirus outbreak.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent strong positive move might have already run out of the steam and positioning for any meaningful corrective slide ahead of the flash version of the US Manufacturing PMI for February.

Technical levels to watch