USD/JPY surrenders early modest recovery gains, back below 112.00 handle

The USD/JPY pair failed to build early up-move and surrendered majority of its early recovery gains to session high level of 112.08. 

With investors looking past Friday's slightly softer than expected US inflation figures, a modest pickup in the US Dollar demand, supported by an uptick in the US Treasury bond yields, helped the pair to gain some fresh traction. 

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Adding to this, global risk-on rally in equity markets was also seen weighing on the Japanese Yen's safe-haven appeal and further collaborated to the pair's minor recovery move from closer to the very important 200-day SMA region and near three-week lows touched on Friday.

The up-move, however, lacked any strong follow through momentum amid absent fundamental drivers and despite hawkish comments from the Boston Fed President Rosengren. 

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Today's US economic docket, highlighting the release of Empire State Manufacturing Index, would now be looked upon for some fresh impetus later during the NA session. In the meantime, broder market risk sentiment and the US bond yield dynamics would remain key determinants of the pair's movement at the start of a new trading week.

Technical levels to watch

On a sustained break back below the 111.80 region (200-day SMA), the pair is likely to accelerate the slide towards 111.50 intermediate support before eventually dropping to the 111.00 handle. Alternatively, a convincing move beyond the 112.00 handle might trigger a short-covering bounce towards mid-112.00s en-route 112.80-85 resistance zone.