USD/JPY erase majority of Friday’s gains, back below 103.50

The USD/JPY pair came under renewed selling pressure at the start of a fresh trading week and has now erased majority of its Friday's strong gains to currently trade around 103.40 region.

Of late the Japanese currency has been weakening on expectations of BoJ monetary easing in September. Moreover, albeit of a slight disappointment from US monthly jobs report, markets still seems to be pricing-in an eventual Fed rate-hike action by the end of this year (though may not be in September), which helped the major to rise beyond 104.00 handle to a five-week highs on Friday.

On Monday, the greenback turned defensive despite of dovish comments from BoJ Governor Kuroda and the prevalent risk-on sentiment, as depicted by upbeat equity markets. 

With a scheduled holiday in the US, in observance of Labor Day, trading activity is likely to remain thin amid low volatility later during NA session, while European equity markets might provide some fresh impetus during European session. 

Technical levels to watch

From current levels, sustained weakness below 103.00 round figure mark is likely to accelerate the slide towards 50-day SMA support near 102.70 region, which if broken would negate possibilities of any further up-move for the pair. 

Meanwhile on the upside, 104.00 handle now becomes immediate strong resistance. A decisive move above 104.00 mark should now assist the pair to extend its near-term upward trajectory initially towards 104.50-60 horizontal resistance and eventually towards 105.00 psychological mark.