USD/JPY remains depressed below 115.00 mark amid weaker USD, risk-on helped limit losses

• Renewed USD weakness prompted some selling around USD/JPY on Monday.
• The risk-on impulse undermined the safe-haven JPY and helped limit losses.
• Mixed fundamentals warrant some caution before placing fresh directional bets.

The USD/JPY pair remained depressed through the early European session and was last seen hovering near the lower end of its daily trading range, just below the 115.00 mark.

The US dollar met with a fresh supply on Monday and exerted some downward pressure on the USD/JPY pair, though the risk-on mood undermined the safe-haven Japanese yen and helped limit further losses. The January FOMC meeting minutes failed to reinforce market bets for a 50 bps rate hike in March. Moreover, expectations that the geopolitical developments might force the Fed to adopt a less aggressive policy stance to combat high inflation weighed on the buck and the major.

The downside, however, remains cushioned, at least for the time being, amid renewed hopes for a diplomatic solution to the East-West standoff over Ukraine. The office of French President Emmanuel Macron announced on Monday that US President Joe Biden and his Russian counterpart Vladimir Putin have agreed in principle to hold a summit on the Ukraine crisis. This, in turn, lifted the global risk sentiment and drove investors away from traditional safe-haven assets, including the JPY.

The combination of diverging forces held back traders from placing aggressive directional bets ahead of the upcoming meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24. There isn't any major market-moving economic data due for release on the back of the Presidents' Day holiday in the US. Hence, it will be prudent to wait for some follow-through selling before positioning for any further depreciating move for the USD/JPY pair.

Technical levels to watch