USD/JPY retreats a few from daily high, still well bid above 149.00 mark

• USD/JPY witnessed a dramatic intraday turnaround from a nearly two-week low.
• A positive risk tone, a goodish pickup in the USD demand offer support to the pair.
• Retreating US bond yields caps any meaningful upside for the buck and the major.

The USD/JPY pair attracts aggressive buying near the 145.45 region and rallies over 425 pips from a nearly two-week low touched this Monday. Spot prices, however, retreat a few pips from the daily high, though manage to hold steady above the 149.00 mark through the early European session.

The Nikkei newspaper reported over the weekend that the Japanese government and the Bank of Japan had intervened in the foreign exchange market on Friday. This was cited as a key factor behind the USD/JPY pair's follow-through decline during the Asian session on Monday, dragging spot prices away from the highest level since August 1990 set on Friday.

Japanese authorities, however, have declined to comment on the matter, which, along with the emergence of fresh US dollar buying, assists the USD/JPY pair to reverse an intraday slide. Moreover, signs of stability in the financial markets undermine the safe-haven JPY and offer additional support to the pair, though the momentum stalls near the 149.70 area.

A further pullback in the US Treasury bond yields acts as a headwind for the greenback and turns out to be a key factor capping the upside for the USD/JPY pair. In fact, the yield on the benchmark 10-year US government bond retreats further from a 15-year high in the wake of a report that some Fed officials are signalling greater unease with oversized rate hikes.

The Fed, however, is still expected to continue to tighten its monetary policy to tame inflation. The BoJ, on the other hand, remains committed to its ultra-lose policy settings, marking a big divergence in comparison to a hawkish stance adopted by other major central banks. This might continue to weigh on the JPY and help limit the downside for the USD/JPY pair.

Market participants now look forward to the US economic docket, featuring the flash PMI prints for the month of October. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Apart from this, traders will take cues from the broader risk sentiment to grab short-term opportunities.

Technical levels to watch