USD/JPY climbs to session tops, inching back closer to 106.00 mark

The USD/JPY pair edged higher through the early European session and was last seen hovering near the top end of its daily trading range, around the 105.75 region.

The pair caught some fresh bids on the first day of a new trading week and recovered a part of the previous session's sharp intraday rejection slide of over 175 pips from the 107.00 neighbourhood. The move-up was supported by the prevalent risk-on mood, which tends to undermine the safe-haven Japanese yen.

The already stronger global risk sentiment got an additional boost on Monday following the release of better-than-expected Chinese Manufacturing and Services PMI prints. The Japanese yen was further pressured by expectations that Japan's next leader will continue the 'Abenomics' economic revival programme.

On the other hand, the US dollar was seen consolidating last week's heavy losses that came after the Fed Chair Jerome Powell's dovish signals at the Jackson Hole Symposium. A subdued USD demand might hold investors from placing any aggressive bullish bets and keep a lid on the USD/JPY pair's attempted recovery move.

During his keynote speech at the Jackson Hole Symposium, Powell on Thursday said that the Fed is willing to allow inflation to overshoot the 2.0% target to support the labor market and broader economy. This coupled with a weaker tone surrounding the US Treasury bond yields kept the USD bulls on the defensive.

There isn't any major market-moving economic data due for release from the US on Monday. This makes it prudent to wait for some strong follow-through buying before positioning for any further intraday gains. Conversely, sustained weakness back below the 105.40 horizontal zone will be seen as a fresh trigger for bearish traders and turn the USD/JPY pair vulnerable to challenge the key 105.00 psychological mark.

Technical levels to watch