USD/JPY trims some of its early gains, slips back closer to 111.00 handle

   •  Flattening of the US bond yield curve caps any meaningful USD up-move.
   •  JPY weighed down by trade-related optimism and helps limit downside. 

The USD/JPY pair trimmed some of its early gains, albeit has still managed to hold with a mild positive bias and comfortably above the 111.00 handle.

With investors looking past Friday's dovish sounding comments by the Fed Chair Jerome Powell, a modest US Dollar rebound helped the pair to regain some positive traction during the Asian session on Tuesday.

This coupled with optimism over a bilateral US-Mexico trade deal prompted a fresh wave of global risk-on trade and was eventually seen driving flows away from perceived safe-haven currencies, including the Japanese Yen. 

The up-move, however, lacked any strong follow-through and the pair quickly retreated around 20-pips from session tops amid continuous flattening of the US bond yield curve, which kept a lid on any meaningful USD up-move.

It would now be interesting to see if the pair continues to find some dip-buying interest at lower levels, sub-110.00 level, or the current bounce turns out to be an opportunity to initiate some fresh selling positions in absence of any major market moving economic releases.

Technical levels to watch

On a sustained break below the 111.00 handle, the pair is likely to accelerate the slide towards 110.65 intermediate support en-route 100-day SMA support near the 110.20 region. Alternatively, sustained move beyond the 111.30-35 region might now assist the pair to aim back towards reclaiming the 112.00 handle.