USD/JPY Price Analysis: Clings to modest intraday gains around 113.65-70 region

• USD/JPY staged a modest intraday bounce from ascending channel support on Monday.
• The set-up favours bulls and supports prospects for the resumption of the prior uptrend.
• A convincing break below the trend-channel support would negate the positive outlook.

The USD/JPY pair attracted some buying on the first day of a new trading week and for now, seems to have stalled its recent corrective pullback from multi-year tops. The pair held on to its modest intraday gains, around the 113.65-70 region through the mid-European session, albeit lacked any follow-through.

The dominant risk-on mood undermined the safe-haven Japanese yen and was seen as a key factor that acted as a tailwind for the USD/JPY pair. Bulls further took cues from elevated US Treasury bond yields, which revived the US dollar demand and assisted the pair to defend the lower end of a short-term ascending channel.

The mentioned support coincides with the 23.6% Fibonacci level of the 109.12-114.70 recent strong move up and should now act as a key pivotal point for short-term traders. A sustained break below will suggest that the USD/JPY pair has topped out already and pave the way for a deeper corrective pullback in the near term.

Meanwhile, technical indicators on the daily chart have eased from the overbought territory and are still holding comfortably in the bullish territory. This, along with the emergence of dip-buying near the trend-channel support, favours bullish traders and supports prospects for the resumption of the prior well-established uptrend.

Hence, a subsequent move beyond the 114.40 intermediate hurdle, towards retesting the recent swing highs near the 114.70 region, remains a distinct possibility. The momentum could get extended towards the 115.00 psychological mark, above which bulls could aim to challenge the trend-channel hurdle, around the 115.30-35 region.

Conversely, a sustained break below the trend-channel support might prompt aggressive technical selling and turn the USD/JPY pair vulnerable to weaken further below the 113.00 mark. The next relevant support is pegged near the 112.70-65 region (38.2% Fibo. level) before the pair eventually drops to test the 112.00 round figure.

USD/JPY daily chart

Technical levels to watch