USD/JPY erases more than 1% on Monday, trades below 110.50

• 10-year US Treasury bond yield erases more than 7% on Monday.
• US Dollar Index slides toward the 99 handle.
• Wall Street's main indexes suffer heavy losses on flight-to-safety.

The USD/JPY came under strong bearish pressure on Monday as the JPY restarted to capitalize on safe-haven flows after struggling to find demand last week. As of writing, the pair was down 1% on the day at 110.45.

Heightened worries over the coronavirus outbreak turning into a global epidemic with a number of confirmed infections rising outside of China, namely in Italy and South Korea. Reflecting the intense flight-to-safety, major Asian end European equity indexes closed sharply lower and the 10-year US Treasury bond yield, which was last down 7.5% on the day, slumped to its lowest level since July.

Furthermore, the Dow Jones Industrial Average and the Nasdaq Composite are down 3.5% and 4%, respectively, as investors show no interest in risk-sensitive assets.

Over the weekend, Bank of Japan Governor Kuroda downplayed the possible impact of the coronavirus by arguing that the economy was not expected to "slump sharply" and said that the heightened volatility in the foreign exchange markets was caused by a product of USD strength.

DXY pushes lower on Monday

In the meantime, the US Dollar Index (DXY) lost its traction amid plummeting bond yields in the second half of the day and dropped all the way down to 99.11 before recovering modestly. At the moment, the DXY is down 0.1% on the day at 99.25 and remains on track to close the second straight day in the negative territory.

In the early trading hours of the Asian session, the Coincident Index and the Leading Economic Index from Japan will be looked upon for fresh catalysts.

Technical levels to watch for