The pair hit a high of 108.72 amid the spike in the early morning but backed off and now price is trading around the 200-day MA (blue line) @ 108.34.
That remains the key line in the sand for any potential upside move this week with downside pressures needing a firm daily break below the 38.2 retracement level @ 107.69 or more preferably the 107.00 handle if sellers can manage that.
As such, those are the key technical areas at play currently for USD/JPY to start the week.
So, what's next for the pair? Let's look at the dollar side of the equation first.
Over the past three weeks, we saw the dollar gain strongly amid liquidity/funding pressures but tailed off last week as the Fed's actions are helping to inject some calm into the market.
However, the longer these lockdowns persist all over the world, the dollar debt burden by many countries - especially emerging markets - will get heavier in due time.
And if central bank swap lines aren't going to cut it, we may see yet another resurgence in asset sales or dollar funding needs down the road.
In fact, this all ties back together to yen and equities sentiment too. If lockdowns continue to persist, businesses will continue to be affected and stock valuations drop. That should lead to a further fall in equities and should underpin the yen.
But the yen appreciation will likely be more evident against other major currencies, as the dollar side of the equation could blow up at any time as noted above.
In that case, the key lines in the sand for USD/JPY i.e. the key daily moving averages, will offer a big tell to investors as to how all of this - and the dollar especially - is going to play out in the coming days/weeks.
If the market runs lower amid a selloff in risk and other assets but USD/JPY is keeping higher, that means dollar funding strains will be starting to rear its ugly head once again.