USD/JPY slips below 134.00, fresh daily low amid broad-based USD weakness

• USD/JPY pulls back from a multi-week high amid the emergence of fresh USD selling.
• Elevated US Treasury bond yields should limit the USD losses and act as a tailwind.
• The BoJ’s dovish stance, a positive risk tone could undermine the JPY and lend support.

The USD/JPY pair retreats from a nearly five-week high, around the 134.80 region touched earlier this Tuesday and extends its steady intraday descent through the mid-European session. Spot prices slide below the 134.00 mark in the last hour, eroding a major part of the previous day's gains and snapping a two-day winning streak.

The US Dollar (USD) comes under some renewed selling pressure and stalls a two-day-old recovery trend from a one-year low set last week, which, in turn, is seen as a key factor dragging the USD/JPY pair lower. The better-than-forecast growth data from China, along with a hawkish tone from the Reserve Bank of Australia (RBA) meeting minutes, boost the Australian Dollar. Adding to this, stronger UK wage growth data supported the British Pound and turns out to be a key factor weighing on the Greenback.

That said, speculations that the Federal Reserve (Fed) will continue raising interest rates should help limit losses for the buck. In fact, the markets are pricing in a greater chance of another 25 bps lift-off at the next FOMC meeting in May, which keeps the US Treasury bond yields elevated. This results in the widening of the US-Japan rate differential, which along with the Bank of Japan's (BoJ) dovish stance and a positive risk tone, undermine the safe-haven Japanese Yen (JPY) and lend some support to the USD/JPY pair.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before positioning for any further intraday depreciating move. Market participants now look forward to the US housing market data - Building Permits and Housing Starts - for a fresh impetus during the early North American session. Apart from this, the US bond yields will influence the USD price dynamics. Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the USD/JPY pair.

Technical levels to watch