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USD/JPY pares early strong gains to nearly 8-month tops

   •  Diverging monetary policy outlook helps break through 114.50 hurdle. 
   •  Cautious sentiment capping additional gains amid absent economic data.

The greenback pared some of its early strong gains against the Japanese Yen, with the USD/JPY pair retreating few pips from nearly 8-month highs touched during the Asian session. 

Expectations for continued monetary policy divergence between the Fed,  anticipated to remain on a path of gradual policy tightening, and BoJ, showing no urgency to exit its ultra-easy monetary policy, helped the pair to break through a significant technical resistance near the 114.45-50 region at the start of a new trading week. 

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The pair touched an intraday high level of 114.74, its highest since mid-March, but was being capped by the prevalent cautious investors' sentiment, which was seen lending some support to the Japanese Yen's safe-haven appeal.

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Currently trading around the 114.40 region, it would now be prudent to wait for a strong follow-through buying interest before confirming a fresh bullish breakout and extension of the pair's near-term upward trajectory. 

There is little in terms of any major market moving economic releases and hence, comments by the NY Fed President William Dudley would now be looked upon for some fresh impetus. In the meantime, broader market risk sentiment would play an important role in driving the pair through European trading session.

Technical levels to watch

Momentum above 114.75 area is likely to confront resistance near the key 115.00 psychological mark, above which the up-move is likely to get extended towards the next major hurdle near the 115.50-60 region.

On the downside, the 114.00 handle now becomes an immediate support to defend, which if broken might trigger a corrective slide towards 113.40 horizontal support en-route the 113.00 round figure mark.

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