• The global flight to safety benefitted the JPY and dragged USD/JPY to a nearly two-week low.
• Russia-Ukraine crisis weighed on the risk sentiment and boosted demand for safe-haven assets.
• Retreating US bond yields, less hawkish FOMC minutes capped any meaningful gains for the USD.
• Sustained break below the 115.00 mark would set the stage for additional near-term weakness.

The USD/JPY pair dropped to a nearly two-week low during the first half of the European session, with bears now awaiting sustained weakness below the 115.00 psychological mark.

The global risk sentiment took a hit on Thursday after Russian media reported of mortar fire in eastern Ukraine. In fact, Russia-backed rebels accused Ukrainian forces of shelling their territory, which triggered a fresh leg down in the equity markets. This, in turn, benefitted the Japanese yen's safe-haven status and dragged the USD/JPY pair lower for the second successive day.

The flight to safety triggered a sharp pullback in the US Treasury bond yields. This, along with less hawkish FOMC minutes, showing that policymakers were not set on a particular pace of interest rate hikes, capped any meaningful upside for the US dollar. This was seen as another factor that inspired bearish traders and contributed to the selling bias around the USD/JPY pair.

The fundamental backdrop supports prospects for a further near-term depreciating move, though bullish resilience near the 115.00 mark warrants some caution. Hence, it will be prudent to wait for some follow-through selling before positioning for an extension of the recent pullback from the vicinity of the multi-year high, around the 116.35 region touched on February 10.

Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and housing market data. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, geopolitical developments would be looked upon for some short-term opportunities around the USD/JPY pair.

Technical levels to watch