USD/JPY remains confined in a range below 114.00 mark

• USD/JPY witnessed a subdued/range-bound price action on the first day of a new week.
• The risk-on impulse, disappointing GDP undermined the JPY and extended some support.
• Sliding US bond yields weighed on the greenback and kept a lid on any meaningful gains.

The USD/JPY pair seesawed between tepid gains/minor losses and remained confined in a range below the 114.00 mark heading into the North American session.

A combination of diverging forces failed to provide any meaningful impetus to the USD/JPY pair and led to a subdued/range-bound price action on the first day of a new week. The risk-on impulse in the equity markets undermined the safe-haven Japanese yen, which was further weighed down by Monday's disappointing GDP print from Japan.

The Preliminary estimate showed that the economy contracted more than expected, by 0.8% in the three months through September and 3.0% on an annualized basis. This, in turn, was seen as a key factor that extended some support to the USD/JPY pair, though a further US dollar pullback from 16-month tops touched on Friday acted as a headwind.

The University of Michigan survey released on Friday showed that the US consumer sentiment plunged to a 10-year low in November. This, along with a fresh leg down in the US Treasury bond yields, kept the USD bulls on the defensive and capped the upside for the USD/JPY pair. That said, hawkish Fed expectations helped limit the USD losses.

In fact, the markets have been pricing in the possibility for an eventual Fed rate hike move in July 2022. Adding to this, the Fed funds futures indicate a high likelihood of another raise by November amid worries about rising inflationary pressure. This, in turn, supports prospects for the emergence of some dip-buying around the USD/JPY pair.

This, in turn, warrants some caution before confirming that the hotter-than-expected US CPI-inspired rally has run out of steam and placing aggressive bearish bets. Market participants now look forward to the US economic docket, featuring the only release of the Empire State Manufacturing Index, for some impetus around the USD/JPY pair.

Traders will further take cues from the US bond yields, which might influence the USD price dynamics. Apart from this, the broader market risk sentiment will drive demand for the safe-haven JPY and further contribute to producing some meaningful trading opportunities around the USD/JPY pair.

Technical levels to watch