• USD/JPY opens with a bearish gap amid heightened coronavirus fears.
• Some renewed USD buying interest helped limit losses, at least for now.

The USD/JPY pair managed to close the weekly bearish gap and is currently placed near the top end of its daily trading range, just above mid-111.00s.

Following the previous session's sharp intraday pullback from multi-month tops, the pair opened with a bearish gap on Monday and was being weighed down by reviving safe-haven demand for the Japanese yen.

The downside remains cushioned amid stronger USD

Market concerns over deepening economic fallout from the coronavirus outbreak were resurfaced on the first day of a new week amid reports indicating a rise in the number of confirmed cases in the north of Italy.

The news weighed heavily on investors’ sentiment and triggered a fresh wave of the global risk-aversion trade. The risk-off mood was evident from a sea of red across equity markets and boosted demand for traditional safe-haven assets.

Bearish traders further took cues from a sharp intraday slump in the US Treasury bond yields, albeit some renewed US dollar strength extended some support, rather attracted some dip-buying and helped limit deeper losses.

The pair recovered around 30-40 pips from daily lows, albeit struggled to capitalize on the momentum and now seems to have stabilized near mid-111.00s, awaiting fresh catalyst before the next leg of a directional move.

In absence of any major market-moving economic releases from the US, the broader market risk sentiment might continue to act as a key determinant of the pair’s momentum and produce some short-term trading opportunities.

Technical levels to watch