USD/JPY hits fresh session lows, slides farther below 111.00 handle

   •  DXY weakens back closer to 3-year lows.
   •  Surging US bond yields does little to lend support.
   •  Further downside seems limited ahead of BOJ.

The USD/JPY pair struggled to build on overnight modest rebound and remained under some selling pressure for the second consecutive session on Friday.

The pair extended previous session's retracement slide from weekly tops and held weaker below the 111.00 handle amid persistent greenback selling bias. Growing concerns about a potential US government shutdown dragged the key US Dollar Index back closer to 3-year lows and was seen exerting downward pressure on the major. 

Meanwhile, a continuous upsurge in the US Treasury bond yields, with 10-yr yields highest hitting levels since 2014, did little to lend any support and stall the pair's slide back closer to previous session's swing low. 

However, a positive trading sentiment around equity markets, which tends to dent the Japanese Yen's safe-haven appeal, coupled with investors' reluctant to place any aggressive bets ahead of next week's BOJ monetary policy meeting, might now help limit deeper losses, at least for the time being.

Hence, the pair seems more likely to enter a consolidation phase and wait for the next fundamental trigger before establishing the next leg of directional move.

Later during the NA session, the release of Prelim UoM Consumer Sentiment and Fedspeaks would be looked upon for some short-term trading impetus on the last trading day of the week. 

Technical levels to watch

Immediate support is pegged near the 110.50-45 region, below which the pair seems more likely to retest 4-month lows support near 110.20 level before eventually dropping to the key 110.00 psychological mark.

On the flip side, any recovery attempts back above the 111.00 handle might now confront fresh supply near the 111.30 area, which if cleared might trigger a short-covering bounce towards the 111.70 region (200-day SMA).