USD/JPY consolidates in a range near multi-month tops, around mid-106.00s

The USD/JPY pair remained confined in a narrow trading band around mid-106.00s through the Asian session and consolidated its recent strong gains to multi-month tops.

A combination of diverging factors failed to provide any meaningful impetus to the major and led to subdued/range-bound price moves through the first half of the trading action on Monday. A fresh leg up in the equity markets undermined the safe-haven Japanese yen and extended some support to the USD/JPY pair. However, retreating US bond yields kept the US dollar bulls on the defensive and capped the upside for the major, at least for now.

The progress on a massive US fiscal spending plan added to the recent optimism about a strong global economic recovery. In fact, the House of Representatives passed US President Joe Biden's proposed $1.9 trillion relief package on Saturday and cleared the way to secure congressional approval. This comes amid the impressive pace of COVID-19 vaccinations and boosted investors' confidence, which, in turn, weighed on traditional safe-haven currencies.

On the other hand, the greenback was pressured by some follow-through pullback in the US Treasury bond yields from over one-year tops touched last week. This was seen as a key factor that kept a lid on any further gains for the USD/JPY pair. That said, the lack of any meaningful selling favours bullish traders and supports prospects for an extension of last week's strong positive move of over 150 pips from levels below the key 105.00 psychological mark.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Manufacturing PMI. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus. Apart from this, traders might further take cues from the broader market risk sentiment to grab some short-term opportunities.

Technical levels to watch