USD/JPY clawing back after two weeks of declines

• USD/JPY climbing back up on USD rebound.
• BoJ ready to intervene if Yen continues to appreciate.

USD/JPY finished Monday higher for a second day in a row, trading near 106.60 heading into the Tuesday overnight session.

The Yen has gained aggressively lately, closing higher against the US Dollar for five of the last six trading weeks, although the pair may have put in a temporary bottom at 105.55.  The Bank of Japan (BoJ) has invested a lot of time trying to sooth-talk the strengthening Yen, and last Friday witnessed the emergence of interventionist rhetoric from the BoJ, with Japan's central bank stating that they are watching FX markets closely, and expressed a willingness to intervene if the Yen continues to appreciate.

The walkback in the Yen coincides neatly with a brief resurgence in the USD this week, with the US Dollar climbing against its major peers in the last two days, though that flame may wink out quickly, as risk aversion is still in play for equities and bond markets, and faith in the US Dollar has continued to be rattled and show weak points as a result.

USD/JPY Technicals

As FXStreet's Valeria Bednarik noted, regarding the USD/JPY technical outlook: "The short-term picture is neutral for the pair, with the risk still skewed to the downside, as in the 4 hours chart, it remains well below bearish moving averages, while the Momentum indicator heads modestly higher around its 100 level, but the RSI keeps consolidating within negative territory, currently around 44."

Support levels: 106.15 105.70 105.40

Resistance levels: 106.85 107.20 107.60