USD/JPY retakes 115.00 mark amid a turnaround in the global risk sentiment

• USD/JPY staged a goodish rebound from the near three-week low touched earlier this Tuesday.
• A turnaround in the risk sentiment undermined the safe-haven JPY and remained supportive.
• Bulls further took cues from rebounding US bond yields, though weaker USD might cap gains.

The USD/JPY pair climbed to a fresh daily high during the mid-European session, with bulls now looking to extend the momentum further beyond the key 115.00 psychological mark.

The pair attracted some dip-buying near mid-114.00s and staged a goodish rebound from the two-and-half-week low touched earlier this Tuesday. The intraday uptick picked up in the wake of a dramatic turnaround in the global risk sentiment, which tends to undermine the safe-haven Japanese yen.

The market nervousness over the worsening Ukraine crisis eased after a Kremlin spokesperson said Russia is still open to a diplomatic solution and has an interest in that. This, along with a strong recovery in the US Treasury bond yields, inspired bullish traders and provided a lift to the USD/JPY pair.

The optimism, however, is likely to remain capped amid the risk of a further escalation in tensions between Russia and the West. Russia upped the ante on Monday by recognizing two breakaway regions in eastern Ukraine as independent entities and allowing troops to enter the area to maintain peace.

The development fueled fears about a full-blown East-West conflict. In fact, the US and its allies are expected to announce new sanctions against Russia. This should continue to lend support to the JPY and 
any meaningful upside for the USD/JPY pair amid the emergence of fresh selling around the US dollar.

Hence, it remains to be seen if bulls are able to capitalize on the move or the USD/JPY pair meets with a fresh supply at higher levels. Nevertheless, the market focus will remain on the situation in Ukraine, which will influence the risk sentiment and provide some impetus to the USD/JPY pair.

Market participants now look forward to the US economic docket, featuring the release of the flash PMI prints, due later during the early North American session. This, along with the US bond yields and the USD price dynamics, should produce some trading opportunities around the USD/JPY pair.

Technical levels to watch