USD/JPY bounces off lows, but holds weaker below 110.00 handle

The USD/JPY pair has managed to recover part of its weekly bearish opening gap, but the recovery move remained capped below the key 110.00 psychological mark. 

N. Korea conducted its sixth nuclear test over the weekend and triggered a fresh wave of global risk aversion trade on Monday, which eventually boosted the Japanese Yen's safe-haven appeal at the start of a new trading week. 

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However, with investors looking past Friday's weaker US monthly jobs report, growing market consensus that the Fed would eventually start unwinding its massive $4.5 trillion balance sheet underpinned the US Dollar demand and helped limit further losses, at least for the time being. 

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Moving ahead, the US markets will remain closed in observance of Labor Day holiday and hence, broader market risk sentiment would continue to be a key determinant of the pair's movement on Monday. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet writes: "Shorter term, and according to the 4 hours chart, the price is around its 200 SMA, having bounced sharply after testing the 100 SMA, while the Momentum indicator heads lower around its mid-line and the RSI consolidates around 58, limiting the downward potential."