USD/JPY drops below 106.00 on plunging US T-bond yields

• USD/JPY falls sharply in American session on Tuesday.
• 5-year US Treasury bond yield plunged to an all-time low. 
• US Dollar Index pulls away from daily highs, stays above 93.50.

The USD/JPY pair came under heavy pressure during the early American session amid plunging US Treasury bond yields. As of writing, the pair was trading at 105.80, losing 0.14% on a daily basis.

5-year US T-bond yield drops to all-time lows on Tuesday

Despite the upbeat macroeconomic data releases from the US, the lack of progress on the next coronavirus relief bill seems to be weighing on sentiment and ramping up the demand for safe-haven Treasury bonds. At the moment, the 10-year US T-bond yield is down 6.8% on the day and the 5-year US T-bond yield, which is at fresh record lows near 0.2%, is losing 9%.

The data published by the US Census Bureau showed on Tuesday that Factory Orders in June increased by 6.2% and beat the market expectation of 5%. Additionally, the ISM-NY Business Conditions Index surged from 39.5 in June to 53.5 in July and the IBD/TIPP Economic Optimism improved to 46.8 from 44.

In the meantime, falling US T-bond yields are weighing on the greenback and the US Dollar Index is posting modest daily gains at 93.55 after touching an interim high of 93.83 earlier in the session.

In the early trading hours of the Asian session on Wednesday, Jibun Bank Services PMI data from Japan will be looked upon for fresh impetus.

Technical levels to watch for