USD/JPY extends fall toward 110 as DXY struggles to pull away from 90

• USD/JPY loses 80 pips on Monday.
• The DXY remains confined in tight range a little above 90.
• The pair is likely to remain quiet for the remainder of the session.

Despite the relatively subdued trading action in the second half of the day, the USD/JPY pair continued to edge lower toward the 110 mark. As of writing, the pair was down 0.65% at 110.34, trading a couple of pips above its fresh four-month low that it set in the last hour.

The US Dollar Index started the week under pressure as the lack of fresh fundamental drivers on Monday allowed the selling pressure on the greenback to stay intact. The DXY plummeted to its worst level since December of 2014 at 90.05 during the European session before making a modest recovery. However, the technical correction lost its momentum near the 90.30 mark and the index was last seen at 90.13, where it was losing 0.55% on the day.

The macroeconomic docket from Japan will offer All Industry Activity Index on Tuesday, which is expected to improve to 0.4% from 0.3% in December. However, investors are likely to ignore this data as the BoJ announcements remain as the sole driver of the JPY. "Even if many observers were confused by the BOJ's operation, it was a good reminder to investors and policymakers alike about the sensitivity to a perceived change in policy.  It may show the limits of forward guidance, with the BOJ saying this is not a change in policy and some investors saying 'yes, it is'," BBH analysts wrote in a recent report.

Technical levels to consider

The RSI indicator on the daily graph eased below the 30 mark with today's drop, suggesting that there could be a technical correction before the next leg down. The pair could encounter the first support at 110 (psychological level) ahead of 109.55 (Sep. 14 low) and 108.85 (Aug. 23 low). On the upside, resistances align at 111.15 (daily high), 111.75 (200-DMA) and 112.45 (50-DMA).