USD/JPY slides below mid-105.00s, near two-week lows

• USD/JPY remained under some heavy selling pressure for the third straight day.
• The US fiscal impasse, sliding US bond yields continued undermining the USD.
• Reviving safe-haven demand benefitted the JPY and added to the selling bias.

The USD/JPY pair continued losing ground through the first half of the trading action on Tuesday and tumbled to near two-week lows, just below mid-105.00s in the last hour. The pair extended last week's rejection slide from the 107.00 region and witnessed some follow-through selling for the third consecutive session on Tuesday. The downfall was sponsored by the heavily offered tone surrounding the US dollar and reviving safe-haven demand. The political deadlock over the next round of the US fiscal stimulus measures forced investors to continue dumping the greenback. Adding to this, sliding US Treasury bond yields and weaker US macro data exerted some additional pressure on the already weaker USD. Data released on Monday showed that the New York Fed's Empire State Manufacturing Index tumbled to 3.7 in August from 17.2 previous and missed consensus estimates by a big margin. This further fueled worries about the US economic recovery and did little to impress the USD bulls. On the other hand, a modest pullback in the equity markets underpinned the Japanese yen's perceived safe-haven demand, which further collaborated to the USD/JPY pair's downfall. Apart from this, the downfall could further be attributed to some technical selling below the 106.00 mark. Meanwhile, oscillators on hourly charts are already flashing oversold conditions. However, technical indicators on the daily chart have just started drifting into the bearish territory and support prospects for an extension of the ongoing depreciating move. Tuesday's US economic docket features the release of Building Permits and Housing Starts. The data is likely to pass unnoticed and do little to provide any meaningful impetus to the major as the key focus remains on Wednesday's release of the latest FOMC meeting minutes.

Technical levels to watch