USD/JPY retreats from highs, still holding comfortably above 108.00 handle

The USD/JPY pair trimmed some of the early strong gains and retreated around 20-pips from session tops, beyond mid-108.00s. 

The fact that weekend passed without any new missile launches from N. Korea, fading demand for traditional safe-haven assets seems to have prompted some short-covering move at the start of a new week. 

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This coupled with a goodish US Dollar recovery, supported by the US President Donald Trump comments on Saturday to speed up efforts to overhaul the US tax code, further assisted the pair to move away from near 10-month lows touched on Friday.

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Meanwhile, the market seems to have largely ignored today's better-than-expected release of Japanese core machinery orders, coming-in to show 8.0% m-o-m growth for July, with broad based USD recovery acting as an exclusive driver of the pair's recovery through Asian session on Monday. 

However, growing doubts over the Federal Reserve's ability to deliver another interest rate hike this year contributed towards keeping a lid on the pair's recovery move. 

Hence, focus would remain on Thursday's closely watched US inflation report, which would provide fresh clues over the possible timing of next Fed rate hike move and eventually determine the next leg of directional move for the major.

US inflation key ahead of Sept 20 FOMC - ING

Technical levels to watch

The 108.00 handle now seems to act as immediate support, which if broken could accelerate the slide back towards 107.70 level en-route multi-month lows support near the 107.35-30 region.

On the flip side, 108.50 area seems to have emerged as immediate hurdle, which if cleared might trigger a short-covering rally even beyond the 109.00 handle towards its next barrier near the 109.25 region.