USD/JPY closes weekly bullish gap, back below mid-109.00s

   •  Italian political uncertainty continues to underpin JPY’s safe-haven appeal.
   •  Weaker US bond yields/USD weakness further adds to the selling pressure. 
   •  Sustained weakness below 109.00 handle needed to confirm a bearish break. 

The USD/JPY pair surrendered early gains to an intraday high level of 109.83 and has now filled the weekly bullish gap. 

With investors looking past the failed attempt to form a euro-sceptic government in Italy, prospects of an early election prompted some fresh safe-haven buying and weighed on the major.

Bears also seemed to track a mildly weaker tone around the US Treasury bond yields, which coupled with a broad-based US Dollar weakness further collaborated to the pair's retracement of around 40-pips from Asian session tops. 

The rejection slide from just ahead of the key 110.00 psychological mark and a subsequent retracement back below the 109.20-109.00 area would indicate a continuation of last week's reversal from four-month tops, levels beyond the 111.00 handle.

Traders, however, are likely to wait for a decisive break below the mentioned support before positioning for any further near-term downside amid holiday-thinned liquidity conditions and ahead of this week's important release of the keenly watched US monthly jobs report (NFP).

Technical levels to watch

The 109.20-109.00 region remains an immediate strong support to defend, which if broken might now turn the pair vulnerable to accelerate the slide towards 108.50-40 intermediate support before eventually dropping to test sub-108.00 level. 

On the upside, 109.70-80 area might continue to attract some fresh supply and is followed by resistance near the 110.00 handle and the very important 200-day SMA, currently near the 110.15-20 region.