USD/JPY bounces back closer to session tops, around 112.70 level

   •  USD fails to extend US tax bill optimism-led up-move.
   •  An uptick in the US bond yields helps regain traction.
   •  Fading safe-haven demand lends additional support.

The USD/JPY pair quickly reversed a knee-jerk fall to 112.30 area and is currently placed near the top end of its daily trading range.

With investors looking past the latest optimism over a long-awaited US tax cut legislation, concerns over a possible US government shutdown, if a spending deal is not extended beyond December 22, prompted some fresh US Dollar weakness and weighed on the pair at the start of a new trading week. 

However, a goodish pickup in the US Treasury bond yields limited deeper losses and helped the pair to regain traction. Adding to this, a fresh wave of global risk-on trade, as depicted by strong gains across equity markets, dented the Japanese Yen's safe-haven appeal and collaborated to the pair's recovery move from the Asian session lows.

Currently placed around the 112.65-70 region, the pair remains at the mercy of broader market risk sentiment and the US bond yield dynamics amid empty US economic docket. 

Technical levels to watch

A follow-through buying interest beyond the 112.85-90 region now seems to lift the pair back towards pre-FOMC resistance near mid-113.00s, above which the momentum could further get extended towards 113.75 supply zone.

On the flip side, 112.30 level now seems to have emerged as immediate support, which if broken would turn the pair vulnerable to break below the 112.00 handle and head towards testing the very important 200-day SMA support near the 111.65-60 region.