USD/JPY hangs near 2-week lows amid notable USD weakness

   •  DXY tumbles to fresh 3-month lows.
   •  Further weighed down by weaker USTs.
   •  Risk-on mood limiting further downside.

The USD/JPY pair struggled to build on its early Asian session recovery move and is now headed to the lower end of its daily trading range.

The pair struggled near two-week lows and remained capped below the 113.00 handle amid persistent US Dollar selling bias. The USD held on the defensive at the start of 2018 and was being further weighed down by a sharp retracement in the US Treasury bond yields. 

Meanwhile, buoyant trading sentiment around equity markets did little to provide any additional boost to the Japanese Yen's safe-haven appeal and might now contribute towards limiting any further downside, at least for the time being.

Investors might also refrain from placing aggressive bets ahead of this week's important events/US macro data, including FOMC meeting minutes and the keenly watched NFP data, and might eventually lead to a range-bound price-action surrounding the major.

Technical levels to watch

Bears would be eyeing for a clear breakthrough mid-112.00s, below which the pair seems vulnerable to break below the 112.00 handle and aim towards testing the very important 200-day SMA support near the 111.65 region.

On the upside, sustained recovery move beyond 112.85-90 immediate hurdle is likely to lift the pair back towards the 113.35-40 supply zone, which is followed by resistance near the 113.75 region.