USD/JPY struggles to capitalize on intraday bounce, flat-lined around mid-115.00s

• USD/JPY reversed the weekly bearish gap opening amid a broad-based USD strength.
• The Russia-Ukraine crisis benefitted the USD’s status as the global reserve currency.
• A steep fall in the US bond yields capped any further gains for the buck and the pair.

The USD/JPY pair struggled to capitalize on its strong intraday recovery from the Asian session low and was last seen trading in the neutral territory, around mid-115.00s.

The pair opened with a bearish gap on the first day of a new week, albeit attracted some dip-buying near the 115.20-115.15 region amid a broad-based US dollar strength. The worsening situation in Ukraine turned out to be a key factor that boosted the greenback's status as the global reserve currency.

In fact, Western nations imposed new sanctions on Russia for its invasion of Ukraine, including blocking some banks from the SWIFT international payments system. President Vladimir Putin upped the ante and put nuclear-armed forces on high alert on Sunday, fueling fears about a full-blown East-West conflict.

That said, a slump in the US Treasury bond yields acted as a headwind for the buck and kept a lid on any meaningful upside for the USD/JPY pair, at least for now. Investors seem convinced that the latest geopolitical developments would force the Fed to adopt a less aggressive policy stance to combat high inflation.

This, along with the global flight to safety, triggered a steep decline in the US bond yields. The USD/JPY pair, so far, remained confined below Friday's swing high, around the 115.75 region. This makes it prudent to wait for strong follow-through buying before traders start positioning for any further move up.

In the absence of any major market-moving economic releases, the incoming headlines surrounding the Russia-Ukraine saga will influence the broader market risk sentiment. Apart from this, the US bond yields will drive the USD demand and provide impetus to the USD/JPY pair, allowing traders to grab some opportunities.

Technical levels to watch