• USD/JPY retreats from a one-month top and is pressured by a combination of factors.
• Japan’s FX intervention news and the risk-off environment benefit the safe-haven JPY.
• A modest USD weakness contributes to the slide, though the downside seems limited.

The USD/JPY pair comes under some selling pressure on Tuesday and erodes a part of the previous day's gains to the 133.00 neighbourhood, or a one-month top. The pair remains depressed through the first half of the European session and weakens further below the 132.00 mark, hitting a fresh daily low in the last hour.

A combination of factors helps revive demand for the Japanese Yen (JPY), which, along with a modest US Dollar downtick, exerts downward pressure on the USD/JPY pair. Japan's Ministry of Finance confirmed a stealth intervention in the FX markets twice in October to provide support to the domestic currency. Apart from this, speculation over an eventual hawkish tilt by the Bank of Japan (BoJ) and the prevalent risk-off environment offers additional support to the safe-haven JPY.

The USD, on the other hand, stalls last week's strong recovery from a nine-month low that followed the release of the upbeat US NFP report and acts as a headwind for the USD/JPY pair. The downside for the USD, however, remains cushioned amid expectations that the Federal Reserve will stick to its hawkish stance. The bets were lifted by Friday's stellar US jobs data, which pointed to the underlying strength in the labor market and should allow the Fed to keep hiking interest rates.

Hence, the focus shifts to Fed Chair Jerome Powell's speech, due later during the US session. Powell's remarks on inflation and monetary policy will be looked for clues about the Fed's rate-hike path. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader risk sentiment should provide some impetus to the USD/JPY pair. In the meantime, the mixed fundamental backdrop warrants some caution before positioning for any further intraday losses.

Technical levels to watch