• Market sentiment turns sour in second half of day.
  • US Dollar Index stretches higher toward 99 mark.
  • Wall Street's main indexes pare early gains, fall into negative territory.

The USD/JPY pair failed to capitalize on the broad USD strength in the second half of the day and is now moving in the negative territory near the 106.20 mark, losing 0.25% on a daily basis.

Market sentiment turns sour

Easing concerns over a prolonged US-China trade conflict allowed the risk-appetite to return to markets in the second half of the week and made it difficult for the traditional safe-haven JPY to find demand. The 10-year US Treasury bond yield posted strong recovery gains on Thursday and pushed higher on Friday to reflect the upbeat sentiment and major equity indexes in the US started the day in the positive territory.

However, with stocks erasing their early gains and T-bond yields slumping into the negative territory, the pair came under a renewed selling pressure. Although there were no fresh catalysts behind that shift in the risk perception, the JPY looks to close the day on a strong note.

On the other hand, a sharp fall witnessed in the EUR/USD pair in the last hour seems to be ramping up the demand for the Greenback, limiting the USD/JPY pair's losses for the time being. At the moment, the US Dollar Index is at its highest level since August 1 at 98.82.

Earlier today, the data published by the US Bureau of Economic Analysis showed that the core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred gauge of inflation, on a yearly basis stayed unchanged at 1.6% as expected to support the USD.

Technical levels to watch for