USD/JPY pares intraday losses to multi-month lows, back around 103.00 mark

• The risk-on mood undermined the safe-haven JPY and extended some support to USD/JPY.
• The USD remains depressed amid hopes for additional stimulus and dovish Fed expectations.
• Bulls might still need to wait for some strong follow-through buying before placing fresh bets.

The USD/JPY pair managed to recover around 30 pips from multi-month lows and was last seen trading with modest losses around the 103.00 mark.

The pair found some support near the 102.70 region, or the lowest level since March 2020 and for now, seems to have stalled its recent bearish trajectory. The underlying bullish sentiment around the equity markets undermined the safe-haven Japanese yen and extended some support to the USD/JPY pair.

Despite concerns about the discovery of new variants of the coronavirus, the optimism over the rollout of vaccines has been fueling hopes for a strong global economic recovery in 2021. This, in turn, was seen as one of the key factors that remained supportive of the prevalent upbeat market mood.

That said, sustained US dollar selling might hold bulls from placing any aggressive bets and cap the upside for the USD/JPY pair. The USD remained depressed on the back of speculations for additional US financial aid package and expectations that the Fed will keep rates lower for a longer period.

Hence, the key focus will on the release of the latest FOMC monetary policy meeting minutes on Wednesday. This makes it prudent to wait for some strong follow-through buying before confirming that the USD/JPY pair has bottomed out in the near-term and positioning for any further gains.

In the meantime, developments surrounding the coronavirus saga and the broader market risk sentiment will play a key role in driving the demand for the safe-haven JPY. Apart from this, Monday's release of the final US Manufacturing PMI might influence the USD price dynamics and provide some impetus.

Technical levels to watch