USD/JPY extends recovery move, inching back closer to 113.00 handle

The USD/JPY pair caught some fresh bids at the start of a new trading week and recovered part of Friday's lost ground to near two-week lows.

Currently placed at session tops near 112.75-80 region, a modest US Dollar recovery, backed by a pickup in the US Treasury bond yields, helped the pair to trade with positive bias through early European session on Monday. 

Adding to this, today's upbeat Chinese macro data eased concerns of an economic slowdown in the world's second largest economy and helped boost investors’ appetite for riskier assets. The same is evident from a mildly positive sentiment around equity markets and was eventually seen denting the Japanese Yen's safe-haven appeal. 

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Investors now look forward to the next big event risk, BoJ monetary policy decision, in order to determine the next leg of directional move for the major. In the meantime, broader market risk sentiment and the USD price dynamics would remain key determinants of the pair's movement.

Today's US economic docket features the release of Empire State Manufacturing Index and would be looked upon to grab some short-term trading opportunities.

Technical levels to watch

Sustained recovery back above 112.75-85 area could lift the pair back above the 113.00 handle en-route 113.15 strong horizontal resistance. On the flip side, 112.50-45 zone now becomes an immediate support to defend, which if broken could drag the pair below the 112.00 handle towards testing 100-day SMA support near 111.80-75 region.