- A goodish pickup in the USD demand assisted USD/JPY to gain some positive traction on Monday.
- COVID-19 jitters underpinned the safe-haven JPY and capped any meaningful upside for the pair.
- A sustained move beyond 100-hour SMA and the 38.2% Fibo. might pave the way for further gains.
The USD/JPY pair reversed an early European session dip to sub-110.00 levels and climbed back closer to daily tops in the last hour, albeit lacked any follow-through buying. The pair was last seen trading with modest intraday gains, around the 110.15-20 region.
The US dollar was back in demand on the first day of a new trading week amid expectations that the Fed could be moving closer to tighten its monetary policy sooner. This, in turn, was seen as a key factor that extended some support to the USD/JPY pair.
That said, worries about the spread of the highly contagious Delta variant of the coronavirus weighed on investors' sentiment. This was evident from the prevalent risk-off mood, which underpinned the safe-haven Japanese yen and capped gains for the USD/JPY pair.
Looking at the technical picture, the recent bounce from the vicinity of mid-109.00s, or near one-month lows stalled near a resistance marked by 100-hour SMA. The mentioned hurdle is pegged near the 110.25-30 region, which should act as a pivotal point for short-term traders.
Meanwhile, mixed technical indicators on hourly/daily charts haven't been supportive of any firm direction. This warrant some caution before placing any aggressive bets ahead of the US CPI on Tuesday and the Fed Chair Jerome Powell's testimony on Wednesday and Thursday.
From current levels, any subsequent positive move is likely to confront stiff resistance near the 110.35-40 region. This coincides with the 38.2% Fibonacci level of the 111.66-109.53 downfall, which if cleared decisively will be seen as a fresh trigger for bullish traders.
The USD/JPY pair might then surpass an intermediate hurdle near the 110.60 region (50% Fibo. level) and aim to test the 110.80-85 resistance zone. The latter marks the 61.8% Fibo. level, above which the stage seems all set for a move beyond the 111.00 round-figure mark.
On the flip side, the daily swing lows, around the key 110.00 psychological mark, or the 23.6% Fibo. level might continue to protect the immediate downside. Some follow-through selling would turn the USD/JPY pair vulnerable to slide back to retest the 109.50 support zone.
USD/JPY 1-hour chart
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Technical levels to watch
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