USD/JPY struggles to capitalize on modest intraday bounce, remains below 140.00 mark

• USD/JPY reverses an intraday dip and draws support from the emergence of USD dip-buying.
• A goodish intraday pickup in the US Treasury bond yields helps revive demand for the buck.
• Intervention fears, a softer risk tone could underpin the JPY and cap the upside for the major.

The USD/JPY pair attracts some dip-buying in the vicinity of the 139.00 mark on Tuesday and stalls the overnight retracement slide from a multi-day peak. Spot prices build on the steady intraday ascent through the early North American session and climb to a fresh daily high, back closer to the 140.00 psychological mark in the last hour.

As investors look past Monday's disappointing release of the US ISM Services PMI, the US Dollar (USD) regains positive traction and turns out to be a key factor acting as a tailwind for the USD/JPY pair. The intraday USD uptick could be attributed to an intraday uptick in the US Treasury bond yields, though is likely to remain limited in the wake of rising bets for an imminent pause in the Federal Resreve's policy tightening cycle.

In fact, the markets are pricing in a greater chance that the US central bank will leave interest rates unchanged at the end of a two-day policy meeting on June 14. This might hold back the USD bulls from placing aggressive bets. Apart from this, the prospect of Japanese authorities intervening in the markets might further contribute to keeping a lid on any meaningful appreciating move for the USD/JPY pair, at least for the time being.

Furthermore, the prevalent cautious mood - as depicted by a softer tone around the equity markets - could benefit the JPY's relative safe-haven status. That said, a more dovish stance adopted by the Bank of Japan (BoJ) might continue to undermine the JPY and limit the downside for the USD/JPY pair. In the absence of any relevant macro data from the US, the mixed fundamental backdrop warrants caution for aggressive traders.

Technical levels to watch