• USDJPY stages a goodish bounce from the 61.8% Fibo. level amid resurgent USD demand.
• The 141.00 confluence support breakpoint might keep a lid on the attempted recovery move.
• Bears might now wait for sustained weakness below the 138.45 area before placing fresh bets.

The USDJPY pair attracts some buying near the 61.8% Fibonacci retracement level of the August-October rally and reverses a major part of Friday's losses to a three-month low. The pair maintains its bid tone through the early European session and is currently placed comfortably above the 140.00 psychological mark.

The US Dollar kicks off the new week on a stronger note in reaction to hawkish remarks by Fed Governor Christopher Waller, saying that the US central bank was not softening its fight against inflation. Waller added that it will take a string of soft CPI reports for the US central bank to take its foot off the brakes.

The Japanese Yen, on the other hand, is undermined by the widening of the US-Japan rate differential, which is seen as another factor lending support to the USDJPY pair. It, however, remains to be seen if bulls are able to capitalize on the move amid firming expectations for less aggressive interest rate hikes by the Fed.

From a technical perspective, any subsequent move up is likely to confront stiff resistance near the 141.00  confluence support breakpoint. The said handle comprises the 100-day SMA and the 50% Fibo. level. Sustained strength beyond could trigger a short-covering rally and allow the USDJPY pair to reclaim the 142.00 mark.

On the flip side, the 140.00 round figure now seems to protect the immediate downside. Any further decline might continue to find support near the 61.8% Fibo. level, around the 139.00 mark. This is followed by Friday's swing low, near the 138.45 region, which if broken decisively will set the stage for a further depreciating move.

USDJPY daily chart

Key levels to watch