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During Monday's Asian session, the USD/JPY attracts some purchasers near the 142.00 round number and recovers a portion of Friday's heavy losses to its over one-week low. Currently, spot prices trade just below the 142.50 area, up nearly 0.30 percent on the day.

The US Dollar (USD) begins the new week on a positive note and, for the time being, appears to have snapped a two-day losing trend to its lowest level since June 2022, which is expected to provide support for the USD/JPY pair. Intensifying expectations that the Federal Reserve (Fed) will increase interest rates by 25 basis points (bps) later this month continues to support elevated US Treasury bond yields and operates as a tailwind for the USD. However, traders' reluctance to place aggressive bets on the USD could be restrained by reduced wagers on future rate hikes beyond the one anticipated for July.

Friday's publication of the US NFP report revealed that the economy added the fewest jobs in 2-and-a-half years in June, suggesting that labour market conditions were finally easing. This, coupled with indications that inflation is progressively decelerating, fueled rumours that the Federal Reserve will eventually soften its hawkish stance sooner rather than later. Aside from this, rumours that Japan may intervene in currency markets to shore up the Japanese Yen may also limit the upside for the USD/JPY pair and call for caution before positioning for a further appreciation.

In addition, traders may prefer to remain on the sidelines until Wednesday's release of the latest US consumer inflation data, which is anticipated to show that the headline CPI will continue to decline in June. Any positive surprise, on the other hand, could prompt aggressive USD short-covering and suggest that the USD/JPY pair's recent corrective decline from the yearly high has reached its conclusion. Prior to placing fresh bullish wagers, it would be prudent to wait for some follow-through purchasing based on the fundamental environment preceding the key data risk.

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