USD/JPY flirting with lows, risks breaking below 111.00 handle

 •  A modest USD rebound quickly runs out of steam amid flattening of the yield curve.
   •  Risk-on mood weighs on JPY’s safe-haven appeal and might limit further downside.

The USD/JPY pair struggled to build on its intraday recovery move and has now retreated to the lower end of its daily trading range. 

The pair's modest uptick quickly ran out of steam near 111.20 area, with some renewed US Dollar selling exerting some fresh downward pressure since the mid-European trading session. 

Following Friday's not so hawkish comments by the Fed Chair Jerome Powell, continuous flattening of the US bond yield curve capped any meaningful USD up-move and was seen as one of the key factors weighing on the major. 

However, the prevalent risk-on mood, as depicted by strong gains across European equity markets, weighed on the Japanese Yen's safe-haven appeal and might now help limit any deeper losses, at least for the time being.

In absence of any major market moving economic releases on the first trading day of the week, the pair remains at the mercy of broader market risk sentiment and the USD price dynamics.

However, this week's important US macro data, the prelim GDP growth figures, will play an important role in determining the pair's near-term trajectory.

Technical outlook

Valeria Bednarik, FXStreet's own American Chief Analyst writes: “The short-term picture for the pair is mildly bullish, as in the 4 hours chart, it bounced from near its 100 SMA, still capped by sellers around the 200 SMA, as technical indicators attempt to recover ground within the positive territory.”

“The pair has a strong static resistance area at around 111.40/50 and would extend its advance on a break above it. However, seems unlikely that the greenback would gather such strength with yields subdued,” she adds further.
 

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