USD/JPY trims a part of its intraday gains, up little around 109.65-70 region

The USD/JPY pair retreated around 15 pips from Asian session swing highs and was last seen trading with only modest intraday gains, around the 109.70-65 region.

Following the previous session's modest pullback from one-week tops, the pair caught some fresh bids on Monday and might now be looking to build on the recent bounce from 50-day SMA support. This marked the second consecutive day of a positive move and was sponsored by a combination of supporting factors.

The underlying bullish sentiment in the financial markets – as depicted by an extended rally in the global equity markets – continued undermining the safe-haven Japanese yen. Apart from this, a modest US dollar strength and signs of stability in the US Treasury bond yields remained supportive of the move up.

Expectations that the Fed might begin the discussion on tapering its asset purchases in the face of rising inflationary pressures. In fact, the pace of inflation in the US climbed to a 13-year high in May. This, in turn, forced investors to lighten their bearish USD bets ahead of the FOMC policy meeting this week.

The fundamental backdrop supports prospects for additional gains, though bulls lacked conviction and once again failed near the 109.80-85 region. This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move amid absent relevant market-moving macro releases.

Technical levels to watch