USD/JPY trades with modest losses, holds steady above mid-104.00s

USD/JPY edged lower during the first half of the trading action on Monday.
Sliding US bond yields undermined the USD and exerted some pressure.
Fading safe-haven demand weighed on the JPY and help limit the downside.

The USD/JPY pair remained depressed through the early European session and was last seen trading near the lower end of its daily range, around the 104.65-60 region.

A combination of diverging forces failed to provide any meaningful impetus to the major, instead led to a subdued/range-bound price action on the first day of a new trading week. Doubts about the timing and size of the US economic stimulus plan triggered a fresh leg down in the US Treasury bond yields. This, in turn, kept the US dollar bulls on the defensive and exerted some pressure on the USD/JPY pair.

In the latest developments, a group of Republican senators urged the US President Joe Biden to cut the $1.9 trillion price tag on his proposed COVID-19 stimulus package. Republicans were reported to have floated a $600 billion alternative to garner bipartisan support. More details are due to be released later this Monday.

The USD/JPY pair, for now, seems to have snapped three consecutive days of the winning streak, albeit the downside seems limited, at least for the time being. A solid rebound in the US equity futures undermined demand for the safe-haven Japanese yen, which was seen as a key factor lending some support to the major.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Manufacturing PMI. Apart from this, the US stimulus headlines might influence the USD price dynamics. This, along with the broader market risk sentiment, might produce some trading opportunities around the USD/JPY pair.

Technical levels to watch