USD/JPY drops to one-week low, eyeing 115.00 mark amid reviving safe-haven demand

• USD/JPY turned lower for the fourth successive day and dropped to a one-week low on Monday.
• The prevalent cautious mood benefitted the safe-haven JPY and exerted some downward pressure.
• A strong pickup in the USD demand did little to impress bulls or stall the ongoing corrective slide.

The USD/JPY pair dropped to a one-week low during the mid-European session, with bears now eyeing a move to challenge the key 115.00 psychological mark.

The pair struggled to capitalize on its intraday move up, instead met with a fresh supply near the 115.85 region and turned lower for the fourth successive day on Monday. The downfall dragged the USD/JPY pair further away from a five-year high touched last week and was sponsored by reviving demand for the safe-haven Japanese yen.

The US Treasury bond yields prolonged their recent strong move up amid growing acceptance for an eventual Fed lift-off in March 2022. The market bets were reaffirmed by Friday's release of the US jobs report, which highlighted a tight labour market and pushed the yield on the benchmark 10-year US government bond to a two-year high.

An extended sell-off in the US bond markets weighed on investors' sentiment, which was evident from a cautious mood around the equity markets. This, in turn, forced investors to take refuge in traditional safe-haven currencies, including the JPY, which was seen as a key factor that exerted some downward pressure on the USD/JPY pair.

Meanwhile, the downtick seemed rather unaffected by a strong pickup in the US dollar demand, bolstered by elevated US bond yields. It, however, remains to be seen if the ongoing corrective pullback marks the end of a one-month-old up-trend or attract fresh buying at lower levels amid absent relevant market-moving macro data from the US.

Market participants now look forward to Fed Chair Jerome Powell's testimony on Tuesday. This will be followed by the latest US consumer inflation figures on Wednesday, which along with Friday's release of the US Retail Sales data will influence the USD price dynamics and provide some meaningful impetus to the USD/JPY pair.

Technical levels to watch