USD/JPY moves back closer to 110.00 mark, fresh session tops

• A combination of factors assisted USD/JPY to attract some buying near 109.70 on Monday.
• The risk-on environment undermined the safe-haven JPY and acted as a tailwind for the pair.
• Rebounding US bond yields extended some support to the USD and provided a modest lift.

The USD/JPY pair recovered around 25 pips from three-day lows touched earlier this month and was last seen trading near daily tops, just below the key 110.00 psychological mark.

The pair stalled the previous session's retracement slide from the 110.25 region, or two-week tops and attracted some dip-buying near the 109.70 region on the first day of a new week. The prevalent risk-on environment undermined demand for the traditional safe-haven Japanese yen and acted as a tailwind for the USD/JPY pair.

Bulls further took cues from a modest bounce in the US Treasury bond yields. As investors digested the Fed Chair Jerome Powell's comments on Friday, the yield on the benchmark 10-year US government bond found a decent support near 1.30%. This, in turn, extended some support to the US dollar and provided a modest lift to the USD/JPY pair.

Despite the supporting factors, the uptick lacked strong follow-through buying and thus, warrants some caution for aggressive bullish traders. This makes it prudent to wait for a sustained strength beyond the 110.00 mark before positioning for a move back towards a two-week-old trading range resistance, near the 110.20-25 region.

A convincing breakthrough will set the stage for additional gains and push the USD/JPY pair further beyond intermediate resistance near the 110.55-60 area and the 110.80-85 region. The momentum could then get extended and allow traders to aim back to reclaim the 111.00 round-figure mark in the near term.

Market participants now look forward to a relatively thin US economic docket, featuring the only release of Pending Home Sales. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities.

Technical levels to watch