USD/JPY remains heavily offered near 130.00 mark, its lowest level since February 10

• USD/JPY remains under heavy selling pressure for the third straight day on Friday.
• Expectations for a hawkish shift by the BoJ boost the JPY and drag the pair lower.
• Some follow-through USD buying could lend support and help limit further losses.

The USD/JPY pair extends this week's rejection slide from the 133.00 mark and continues drifting lower for the third successive day on Friday. Spot prices drop to the lowest level since February 10 during the first half of the European session, with bears now looking to extend the downward trajectory further below the 130.00 psychological mark.

The Japanese Yen (JPY) strengthens across the board in reaction to the domestic data, showing that an important gauge of Japan’s consumer prices rose at its fastest pace since 1982 in February. In fact, Japan's core-core CPI, which strips out energy and food prices but includes alcoholic beverages, accelerated to 3.5% in February - marking the fastest year-on-year increase in 41 years. This boosts expectations that the Bank of Japan (BoJ) will tweak its bond yield control policy in the near term, which, in turn, benefits the domestic currency and continues to exert downward pressure on the USD/JPY pair.

Bearish traders further take cues from a further decline in the US Treasury bond yields, led by the Federal Reserve's signal that it might soon pause the rate-hiking cycle in the wake of the recent turmoil in the banking sector. In fact, the yield on the benchmark 10-year US government bond and the rate-sensitive two-year Treasury note languish near a six-month low touched earlier this week. This results in a further narrowing of the US-Japan rate differential, which is seen as another factor that drives flows towards the JPY and contributes to the heavily offered tone surrounding the USD/JPY pair.

The US Dollar (USD), on the other hand, is gaining some follow-through traction for the second successive day and building on the overnight goodish rebound from a seven-week low. This, in turn, is holding back bearish traders from placing fresh bets around the USD/JPY pair and helping limit the downside, at least for the time being. Nevertheless, spot prices remain on track to register losses for the fourth straight week and the aforementioned fundamental backdrop supports prospects for an extension of the recent rejection slide from the 200-day Simple Moving Average (SMA).

Market participants now look forward to the US economic docket, featuring the release of the Durable Goods Orders data and the flash PMI prints for March later during the early North American session. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities on the last day of the week.

Technical levels to watch