USD/JPY drops to fresh multi-month lows below 109.00

• USD/JPY continues to push lower in the early American session.
• US Dollar Index returns above 92.00 after US data.
• 10-year US Treasury bond yield is losing more than 1%.

The USD/JPY pair came under renewed bearish pressure during the American trading hours and dropped to its lowest level since late May at 108.88. As of writing, the pair was down 0.26% on a daily basis at 108.98.

Falling US T-bond yields drag USD/JPY lower

The risk-averse market environment is weighing on US Treasury bond yields in the second half of the day and causing USD/JPY to remain on the back foot. Currently, the benchmark 10-year US T-bond yield is down 1.1% on the day at 1.164%.

On the other hand, the US Dollar Index pared earlier losses and turned flat on the day in the last hour, limiting USD/JPY's downside for the time being.

The data from the US revealed on Tuesday that Factory Orders rose by 1.5% in June, surpassing the market expectation for an increase of 1%. On a negative note, the IBD/TIPP Economic Optimism Index edged lower to 53.6 in August from 54.3 in July.

In the meantime, the S&P 500 and the Nasdaq Composite indexes, which opened modestly higher, are losing 0.1% and 0.5%, respectively, confirming the negative shift witnessed in market sentiment. 

There won't be any other data releases from the US in the remainder of the day and the risk perception is likely to continue to impact USD/JPY's movements.

Technical levels to watch for